GLOBAL - Pension funds should brace themselves for more poor returns next year, fund managers warn.
A common worry is that stagnant growth in Japan and Germany will hinder the global economy.
Barclays Global Investors chief economist Haydn Davies said: “They are certainly the two regions in the direst straights, with policy makers who are pretty reluctant to do anything about it.
“Growth is going to have to come out of America as it is the world’s largest economy and the second and third biggest are in trouble. The US economy is not firing on all cylinders at the moment, so the message is that 2003 is going to be another disappointing year.”
Schroder Investment Management chief economist Keith Wade agreed and said that while consumer spending would help prop up the economy in the new year, more stimulus will be needed.
Newton Investment Management chief global strategist Peter Hensman added: “The biggest problem will be the fact that the nominal rate of growth will undershoot market expectations.
“There’s also going to be further increases in unemployment, which will constrain consumer spending more than people are expecting.”
The most pessimistic forecasts have come from SG Asset Management chief executive Nicola Horlick, who believes the bear market is far from over, and that the FTSE100 could “easily” fall to 3000. The last time the FTSE was at that level was 1994.
The only positive note comes from Standard Life Investments which believes that the US and UK economies are set to outperform continental Europe and Japan.
Head of global strategy Andrew Milligan points out that where the fiscal strategies of both Europe and Japan are constrained by debt, the US government is making tax cuts and the UK is increasing public spending.
He said: “The US deficit is on course for US$300bn (£193bn), not yet a major concern for the world’s largest economy – it only amounts to 3% of GDP.
“It is quite a different story for Europe and Japan which means no stimulus for the countries that need it most. Both economies lag behind the US and UK.”
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