US and global economies may exceed expectations
It is likely the US and global economies will outperform growth expectations, a US-based portfolio manager has said.
While economic recovery to the tune of 7 per cent or 8 per cent in the US has been projected "based on maths", 2 per cent is the general expected level of growth, according to Safa Muhtaseb, managing director of an affiliate Legg Mason fund manager, Global Currents.
However, Muhtaseb said growth of approximately 3 per cent to 4 per cent in the US and 2.5 per cent to 3 per cent globally was a more likely outcome.
He said 8 per cent was unlikely given global deleveraging and "retrenchment of the US consumer", the latter of which drove 70 per cent of the country's gross domestic product.
However, Muhtaseb was optimistic that "sustainable growth" was possible, suggesting the impact of global stimuli had been underestimated by many.
"This will definitely create some activity," Muhtaseb said. "Bears failed to appreciate how massive the [economic] contraction was … how large the cost-cutting was."
He added that it would not, however, be "normalised" to 2007 activity and that despite a "gradual uptick" in retail spending, consumption won't go back to 2006-07 and early 2008 levels. "[We're in] the early stages of recovery," he said.
While Muhtaseb would not rule out a W-shaped recovery, he believes the likelihood of further deterioration over the next few quarters is very low.
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