Which countries are best navigating a slowdown?
While multiple regions are facing a slowdown, differences in macro factors mean some will fare better than others, according to J.P. Morgan Asset Management.
Speaking on a webinar, Virginia Martin Heriz, portfolio manager in the macro strategies team, said the US, Europe and Asia Pacific ex China were all experiencing a slowdown in growth while China was experiencing a contraction. All four regions were experiencing a slowdown in sentiment.
“If you look at US, APAC, and Europe, there is a slowdown in growth but the macro cycle indicators are still high and it still growing above trend but in China, they are in contraction. So, we have a more positive on the US and Europe because it’s only a soft slowdown,” she said.
“We think there is ability and willingness to do fiscal stimulus in the US and there is the willingness to continue on that path. We see that a bit in Europe too to a lesser extent. There are also excess savings in both the US and Europe which supports consumption and consumption has been very resilient during COVID-19.
“So yes, these countries are experiencing a slowdown but that’s because we’re coming down from a very, very high rate of growth which was the pandemic rebound.”
Meanwhile, global market strategist, Kerry Craig, spoke about central bank tapering and said he expected the Federal Reserve to begin tapering in mid-November. The next Federal Open Market Committee meeting was due to be held on 2 to 3 November.
“You are going to see an announcement in November, potentially about tapering starting in mid-November or December. It’s become a fait accompli that we should see tapering over the course of this year and then wrap up sometime next year and the market will be OK with that because it’s been very well telegraphed and not expected to be a disruption,” Craig said.
However, Craig said he did not expect the Reserve Bank of Australia (RBA) would follow the same path as the Fed as the market dynamics differed between the two countries.
“I don’t think we expect the Reserve Bank of Australia to be moving in line with the Fed in terms of rate hikes, I really think the RBA will ramp up its tapering by the middle of next year. We don’t have the same wage pressure and have a little bit more output gap so there’ll be a bit of a lag between the RBA moving and the Fed.
AUTHOR
Laura Dew
Recommended for you
Outflows from an Australian private markets fund manager have caused FUM at Pacific Current to decline by $1 billion in the last quarter.
Former RIAA chief executive Simon O’Connor has joined the ethical advisory panel at U Ethical Investors.
Financial services leaders are “all cashed up with nowhere to grow” when it comes to M&A activity, according to Deloitte, with 90 per cent saying they have strong balance sheets ready for an acquisition.
As fund managers are urged to diversify their product ranges, they are finding a faster way to do this is via an acquisition of existing firms but experts say it is not without potential culture clashes.
