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Macro views for 2015

This article is part of
Guide to macro-economics and investment portfolios

The global recovery continued in 2014, but Emiel van den Heiligenberg, head of asset allocation at Legal and General Investment Management, says it failed to broaden and strengthen as expected by most forecasters.

Mr van den Heiligenberg says a number of factors continued to keep growth in check.

These included tighter fiscal policy in a number of countries, geopolitical tensions, bank deleveraging in the euro area and more concerted attempts across a number of emerging market economies to either constrain credit growth or meet inflation targets.

As these headwinds fade, Mr van den Heiligenberg says the most likely outcome is some gradual strengthening of global growth through 2015 and a major divergence in monetary policy between the US and UK versus the euro area and Japan.

He says US and UK growth should maintain its momentum and the drag from Japan’s consumption tax increase should begin to diminish.

China’s switch to policy loosening should help stabilize growth and the prospects for India appear promising, he adds.

Mr van den Heiligenberg says the outlook for the euro area remains uncertain, but further policy easing should support the economy.

This economic view leads to a relative constructive view on risk assets at the start of 2015, he says.

Mr van den Heiligenberg says: “While we must be wary of the risks, there are several asset classes which present opportunities should global growth improve as expected to around 3 per cent next year.

“Furthermore, even though global growth has disappointed in recent years, there is still a chance that exceptionally loose monetary conditions trigger an even stronger global investment accelerator cycle.”

David Pages, senior economist at Axa IM, says his investment house’s current macro view is that the global economy is about to be pulled in different directions from different economies.

On balance, he says Axa IM sees overall global growth expanding at broadly the same pace in 2015 as in 2014 (3.3 per cent).

Within that, Mr Pages says he expects the US economy to see a clear acceleration towards 3 per cent in 2015 (from 2.25 per cent in 2014), underpinned by continued recovery in consumer spending.

In the eurozone and Japan, Mr Pages says growth is likely to be sufficiently weak to justify ongoing stimulus from their respective central banks, “although we expect Japanese growth in 2015 to exceed 2014’s rate”.

He says China has also seen further central bank stimulus and Axa IM expects that to help the economy stabilise at a still fast pace of expansion around 7 per cent.

Meanwhile, in the UK, Mr Pages says the economy is likely to lose its mantle of fastest growing G7 economy in 2015, although Axa IM still expect solid expansion of around 2.25 per cent.

He says: “Inflation is likely to remain subdued in each of these jurisdictions in the short-term, in part driven by local supply and demand conditions, but in part due to the decline in key global commodity prices, including oil and food.