SINGAPORE (June 25): Rising US-China trade tensions have heightened fears of a recession, but asset manager State Street Global Advisors remains upbeat on global economic growth – at least for now.
In its mid-year global outlook published Tuesday, SSGA says it continues to see room for moderate global economic growth, on the back of a more accommodative policy stance by the US Federal Reserve.
“Last December, markets became overly concerned about the outlook for global growth, thanks to the impact of the US-China trade conflict and what many saw as the Fed’s overly hawkish tightening schedule,” says Lori Heinel, SSGA’s deputy global chief investment officer. “Today, trade risks persist, but the policy stance has shifted.”
The way SSGA sees it, macroeconomic factors should continue to support earnings growth.
However, it warns that investors need to be cautious as volatility could easily spike given the significant geopolitical and growth risks facing the global economy.
“We see potential for the economic cycle to extend, especially in the US where there is considerable momentum, but continue to monitor trade developments carefully,” says Rick Lacaille, global chief investment officer at SSGA.
SSGA is remaining “overweight” on equities, but says investors should maintain a defensive bias amid the trade risks.
It is also positive on emerging markets, which continues to be “attractive” with its long-term growth story intact.
“Emerging market equity valuations relative to other regions are at all-time lows, while earnings per share and sales forecasts are holding up well,” says Kevin Anderson, SSGA’s head of investments in the Asia Pacific region.
“For fixed income investors, higher-yielding emerging market debt should drive long-term returns despite local currency volatility in the short run,” he adds. “Overall, the stabilisation of the Chinese economy is also positive for emerging markets.”
