Economic Outlook: Staying Upbeat in a Down Quarter

The Global Portfolio Strategies Team recently released a quarterly economic outlook. A summary of the conclusions from that paper is provided below.

• We expect that markets will continue to be choppy in the near term, but our long-term view is optimistic. We believe that market volatility will eventually abate in the face of solid economic fundamentals and reasonable equity valuations.
• Three chief concerns have resulted in the second quarter’s market disarray. They are, in order of importance, the sovereign debt crisis in the eurozone, the fear that the United States and other developed economies are lapsing back into recession as government austerity measures take hold and concern over China’s policy response to its emerging property market bubble and more general inflation problem.
• We view the actions taken to date within the eurozone as helpful but not decisive. They may have staved off a near-term restructuring of Greek debt and relieved a developing liquidity crisis in Portugal and Spain, but they have not addressed the longer-term solvency concerns of the most precarious debtors.
• The difficulties facing Europe—fiscal austerity, stress in the banking system, slow growth or recession (depending on the country) and persistent worries over the integrity of the euro—are issues that will continue to adversely affect investor sentiment.
• Although our conviction is being tested by the recent spate of weak economic data and the poor performance of risk-related assets, SEI is sticking to the position that the world economy will continue to grow, led by emerging-market economies and, to a more moderate extent, the U.S.
• Growth in China should remain robust relative to other countries, but the rate of gain will likely slow as the accumulative effects of the yuan appreciation become felt and the government takes additional measures to rein in inflation pressures.
• We believe that the bearish sentiment permeating the market at this point is overblown; there are many positive signs that may result in a more positive outcome. They include low interest rates, expansionary monetary policy, growth in global manufacturing and strong finances for corporations.
• Although investor confidence has been shaken by the developments of the past quarter, we do not believe a new bear market has begun. Buying on the dips may not feel great at the moment but should prove rewarding with the passage of time.

A full-length paper is available if you wish to learn more about this timely topic. To receive "Economic Outlook: Staying Upbeat in a Down Quarter," please complete the short form below.

Staying Upbeat in a Down Quarter

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