GLOBAL - Fund managers are divided over whether equity markets will recover following the conclusion to fighting in Iraq.
Managers – including Axa Investment Managers and Standard Life Investments – claim military action in the Middle East has distracted investors. But now that the fighting has stopped, investor focus will move back to economic fundamentals.
Axa Investment Managers senior investment strategist, Nigel Richardson, said: “As war with Iraq is now virtually at a close, the emphasis will swing back towards longer-term fundamentals.
“When investors start to look beyond the conflict in the Gulf and back to fundamentals, they will find a US equity market that is now back to fair value.”
Richardson predicts the global economy will recover during the second half of the year, particularly in the US where growth will be sustained by the government’s fiscal and monetary policies. This will, in turn, provide a boost to the global economy.
Standard Life Investments head of global strategy, Andrew Milligan, agreed.
He said: “We’ve seen a sharp fall in consumer and business confidence, which started to turn around after the statue of Saddam Hussein fell.
“There are also one or two hints from companies that they are about to raise prices and begin to think longer term about their investment decisions.
“It’s very early stages, but this is in line with the consensus view of a weak first half followed by a better second half of the year.”
But Pictet Asset Management head of asset allocation Mike Collins believes Richardson and Milligan are guilty of “wishful thinking”.
He says there is very little to be optimistic about in the global economy – a view shared by Barclays Global Investors UK chief economist Haydn Davies.
Davies said: “It is very easy to blame the war in Iraq for the world’s problems but they were there long before the Iraq issue appeared.
“The fundamental problem is that global economic growth is too reliant on US household spending.
“European and Japanese households are not spending and firms around the world are not investing.”
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