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Macro outlook - April 2011

14-04-2011 | News item Ronald Doeswijk, Léon Cornelissen and Lukas Daalder, Senior Strategists with Robeco’s Economic and Financial Markets Analysis team, share their outlook.

Numerous black swans in the global economic lake

Highlights

  • The global economic recovery is doing well. According to the OECD, it is even becoming self-sustaining. At the same time, however, the recovery is faced with great uncertainty. Historically, stocks have tended to trade broadly sideways in the first phase of monetary tightening. Adding this to the lingering tensions in the Middle East, we continue to take a wait-and-see approach with respect to equities.
  • We cannot think of a single positive that has emerged from the earthquake that hit Japan on 11 March. Japan is not a young, vibrant economy. Nor does it have a wealthy government that is well-placed to address the current problems, which are huge. Stocks may be cheap from a bottom-up perspective. But a top-down approach suggests that the outlook for Japan has taken a clear turn for the worse.
  • Tensions in the Middle East are pushing the oil price higher. It would be wrong, though, to attribute this continued rise solely to political turmoil. Before the crisis erupted, oil was already in an uptrend, based on the ongoing recovery in the world economy. All commodity sub-indices are higher on a year-to-date basis and are, in fact, trading close to two-year highs. We expect a continued outperformance by the commodity asset class.
  • Within equities, the best regional performance over the last month came from emerging markets, which seem to have benefited from a rare flight to safety. Following the experience of the credit crisis, emerging markets are now seen as the most dynamic region, with the best fundamentals in the event of a crisis. We continue to prefer emerging markets to both Europe and the Pacific. We take a neutral view on the US.
  • In this month’s special, we analyze the never-ending European debt crisis. The efforts of Europe’s leaders in March to end the crisis through a grand bargain addressing all the outstanding issues ended in failure. Don’t expect sovereign risk in the eurozone to disappear soon.

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