UK on long road to recovery: JPMorgan

Economists at JPMorgan Asset Management have cut the firm’s global average forecast from 7.5 per cent to 6.5 per cent as it expects 2015 to be a tougher year for investors.

In its 91-page annual report, Long-Term Capital Market Return Assumptions, the asset manager also predicted global growth will be constrained and that inflation will remain stagnant.

Investors may need to invest in less liquid classes and invest in commodities, emerging markets and real estate for diversification.

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The report, now in its 19th year, also predicted an end to indebtedness and an overall rebalancing of the OECD economies in the next 10 to 15 years.

David Shairp, portfolio manager and global strategist in JPMorgan Asset Management’s global multi-asset group, said that before 2007, the OECD had been the largest driver of global growth but since 2007 emerging markets have outperformed.

He added that in 2006 - on the eve of the financial crisis - there was a sizeable current account deficit as a percentage of GDP in the OECD regions, while emerging markets ran huge surpluses.

However the financial crisis has reversed this trend and current account deficits had reduced particularly in the US and the UK.

Mr Shairp said this deleveraging would come at a cost over the next five to 10 years and that the price would be lower growth.

He added: “The US and the UK are the only economies where debt has reduced. The US and the UK stand out because there has been meaningful deleveraging in households, particularly in the US. This is painful but arguably positive in the longer term.

“We are on a long, slow road to normalisation. The good news is that inflation remains relatively benign.”

Adviser view

Frances Kemp, a financial adviser at Nurture Financial Planning in Norwich, said: “We go for diversification all the way. We use risk-constrained multi-managers who have the expertise to make these decisions. We take a longer term view. ”