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Macro outlook - June 2011

09-06-2011 | News item Ronald Doeswijk, Léon Cornelissen and Lukas Daalder, Senior Strategists with Robeco’s Economic and Financial Markets Analysis team, share their outlook.

Growth momentum slows

Highlights

  • The momentum of the world economy is slowing. Worries about increasing inflationary risks are set to fade into the background in the coming months. Instead, the focus will be on two other themes: the “double dip” and “QE3”.

  • We do not expect too much from equities in the months ahead. On a 12-month horizon, however, we do forecast positive returns. Although earnings are still a driver, significant positive earnings surprises are unlikely, as margins are high and the economy will not generate strong growth.

  • The outlook for corporate bonds, while still positive, is deteriorating. Spreads widened over the last month. Recent economic data suggests that growth in the global economy is slowing. Even so, producer confidence is close to historical highs, which means there is no reason to become pessimistic at this stage. Corporate bonds are not cheap, but these spreads are still attractive.

  • The correction in commodity prices can be attributed to the declining risk that oil production in Saudi Arabia will be affected by the social unrest in the Middle East. In addition, the market appeared to be overbought; in other words, mass psychology played a role. Furthermore, recent macro data has tended to disappoint. It might take a while before commodity prices reach new highs.

  • Within equities, emerging markets are still our favorite region. Inflation risks have declined now that growth is slowing. Nevertheless, some further tightening will be needed. Even so, the outlook is still for continuing growth. Moreover, these countries will not be troubled by sovereign-debt restructuring.

  • This month’s special focuses on the US consumer, who appears to have surrendered his role as the engine of the world economy to the growth miracle of emerging markets. This does not mean that low growth is inevitable; rather, the US consumer will—on average—track growth and not lead it.

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