For more than 20 years in the region, we've helped investors navigate the markets with our talented investment teams and broad and deep research platform.
The combination of low real rates, higher equity valuations, overinvestment in commodities, high profitability, lower capitalization rates in real estate and tighter credit spreads argues for just a moderate overweight to equities for now.
Welcome to our newly designed website. Find out more about what we have to offer.
Our global growth estimate for 2015 was lowered to 2.8% this month, down 0.2% from last month’s projection. A weaker start to the year in the developed economies—mainly driven by the scant 0.2% annualized gain in US 1Q GDP—was primarily responsible for the downward revision.
Through April of this year, core consumer prices advanced at their fastest rate in five years. The bulk of this rise occurred in various consumer service categories—items basically influenced by domestic demand trends and labor markets. Policymakers have long wanted consumer price inflation to regain the 2% mark. Based on current trends, that’s likely to occur faster than what they’ve been predicting.
The positive income effect from lower crude oil prices is likely to be less than meets the eye in Asia, where crude oil accounts for a relatively small part of retail oil product prices. Still, a favorable inflation outlook in the coming months, due in part to the lower oil prices, provides leeway for central banks to maintain an accommodative monetary policy.
Falling commodity prices and their spillover to incomes and spending remain central to the economic debate in Australia and New Zealand. It would not surprise us to see the RBA reinstitute its easing bias at the next policy meeting, and there’s a reasonable chance the RBNZ could soon follow the RBA down the rate cut path—perhaps as early as June.
The global growth outlook remains unsettled and the outlook is largely dependent on the causes and consequences of the sharp decline in oil prices. In our view, the sharp drop in the global oil price is principally a supply-side phenomenon. Increased output in non-OPEC countries, particularly the US, and the lack of production cutbacks from the traditional oil producers have triggered a surplus-supply situation.
Markets delivered at least four big surprises so far in 2014: Oil prices collapsed. US bond yields fell. The US dollar rose against almost every currency. And small-cap stocks underperformed. At the end of 2013, very few investors were ready to capitalize on these trends. We expect 2015 to be another volatile year. Markets could be whipsawed by concerns of a global slowdown and the impotence of monetary policy on the one hand, and of higher US interest rates and lower liquidity on the other if growth is too strong.