The global economic recovery remains on track despite the setback of April's newsflow. Graeme John...
The global economic recovery remains on track despite the setback of April's newsflow.
Graeme Johnston, investment director at Britannic Asset Management, said he remains confident of global equity markets rebounding despite the recent downturn in output figures.
The steep recovery hitherto enjoyed in the ISM manufacturing index has flattened, while the labour market, which has been improving for some months, has fallen back once more. UK output has remained flat quarter on quarter, falling short of modest expectations, while German manufacturing slid further.
Johnstone said: 'We are not inclined to write off recovery at the first sign of some disappointing data. In our view, overall newsflow continues to support the view of a sustained but modest recovery.'
Johnstone admits investors may have to look beyond the US for positive economic surprises. The house is overweight Europe, the Far East and Japan.
Britannic remains bearish on bonds, however, despite positive pressures in the near term. The mixed economic picture has resulted in a mixed interest rate outlook, Johnstone noted.
The Fed and Bank of England's overtures have led to an expected raising of rates in the second half of the year. This bolstered bond markets in the short term, he noted, although much of this unwound as equity markets bounced in May.
Johnstone said: 'Our view remains that economic recovery, however modest, and an eventual turn in the interest rate cycle will keep bond yields under some upward pressure over the rest of the year.
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