Amsterdam, 11 July 2012 –Robeco Group announced its financial markets outlook for the second half of 2012 at the Concertgebouw in Amsterdam. The world economy continues to weaken and the risk of a universal slowdown is very real, according to Ronald Doeswijk, Chief Strategist, and Léon Cornelissen, Chief Economist.
Robeco Group economists gave the following outlook at a roundtable in Amsterdam yesterday.
The highlights of the half year outlook include:
- World economy: Continued weakening. On the positive side, the decline of the oil price is bringing down headline inflation, paving the way for further conventional and unconventional monetary stimulus. Real income in the developed world should rise. Furthermore, Europe’s leaders have once again managed to give the can a firm kick down the road. Expectations of renewed strength in the fourth quarter.
- Emerging debt: Better prospects than government debt. Local currency government bond yields are currently averaging 6.1%. This is attractive compared with developed markets government debt. A continued preference for investment-grade credits to emerging debt because of a better risk/reward pay-off.
- Equities: A retained hesitance to upgrade the somewhat negative view on financials. Outside financials, a continued slight preference for selected cyclical sectors, IT and consumer discretionary. Until recently, these sectors beat the market. Earnings revisions are still above the market average, but the current economic conditions warrant a cautious approach.
- Emerging Markets: The Chinese economy is showing signs of cooling. In part, this is due to declining exports, one result of the escalating euro zone debt crisis. It is also partly the result of Chinese policies to rein in the housing market and combat overcapacity in sectors such as steel. Indian economic growth fell sharply in Q1 2012 to 5.6%, a very modest level by Indian standards. Brazil’s government and central bank are expected to continue their activist policy regarding the country’s economy. The falling oil price is bad news for the Russian economy, which received a boost from government spending prior to the elections in early March. Growth is declining.
(Photo: Irene Noordhof)