Amid muted outlooks for global markets, Zurich Insurance’s chief market strategist is more optimistic than most and told FTAdviser that global growth this year will top last year’s figures.
Speaking to FTAdviser, Guy Miller explained that while performance will ultimately be determined by policy makers - with economists constantly second guessing central banks - global growth will be driven by a US economy pushing above trend.
He also said he was bemused at the cynicism of investors, given the equity bull run during 2014.
“I’ve never seen so many glum people given the period we’ve just had; there’s not been the usual excessive exuberance you get with these types of returns.”
Given the insurer’s senior team outlook is so positive, Mr Miller said its short-term equity calls are based on equity and credit markets doing well during 2015, while bond yields will pick up from their historic lows towards the end of the year, but at a glacial pace due to high debt levels in most economies.
The European Central Bank’s meeting on 22 January is expected to be a pivot point, with Zurich calling for “significant action” to make sure it can continue to credibly deliver on its mandate.
“[ECB president Mario] Draghi has talked a good game for the last couple of years, but the reality is there has been a lack of action, with inflation expectations completely de-anchored - accentuated by falling oil prices - so conviction and haste are needed,” Mr Miller said.
He continued that quantitative easing in Europe is different from in the US, where asset price inflation was the answer for its consumption-based economy, while in the EU there is a need to create a lending environment and weaken the currency.
“The EU also needs to follow the US lead in strengthening its primary ABS [asset backed security] market to boost lending and move away from a purely banking culture. We need the banks to help support growth, but they need to securitise loans and get rid of loans on their books so they can start lending again themselves.”
As for interest rates, Mr Miller expects the US Federal Reserve to move towards the end of this year, or maybe into 2016, with the Bank of England following this lead and definitely waiting until after the election to increase base rates.
“There will be fiscal tightening by whichever party wins the general election, so we probably won’t see a rate rise until at least after the next Autumn Statement.”
peter.walker@ft.com
