UK - Fund managers are urging schemes to put more money into equities to take advantage of market upturns this year.
Schemes have suffered three consecutive years of negative equity returns, but fund managers believe that trend is about to change.
Standard Life Investments global investment strategist Ken Forman (pictured) said: “The necessary conditions for a recession – especially in the US and UK – are not in place, and the chances of the major economies sliding into deflation appear small.
“In the economic environment that we expect to unfold in 2003, there is scope for companies to increase profits through a mixture of cost-cutting, outsourcing and some revenue growth. Investors are currently more pessimistic than perhaps they should be.”
Barclays Global Investors chief economist Haydn Davies agreed. He said: “While the economic environment could be more promising, there are no signs to suggest that the global economy is on the verge of lurching back into recession, let alone a drawn-out depression.
“Stock markets and bond markets, too, have got a little carried away over the past few years. As the global economy picks up and as firms continue to make progress in rebuilding their profitability, stock markets should rally further.”
Threadneedle Investments head of investment communications Helen Mackin saw economic growth reviving slowly during 2003, but added that a quick resolution to the tensions in Iraq would provide a boost to markets.
“An outbreak of peace or a quick, clean victory for a US-led but UN-backed force would be the best outcome,” she said.
“Either could swiftly erase the ‘war premium’ in the oil price, taking the price of a barrel of oil below US$20, with positive knock-on effects for the US economy, where lower petrol prices act as an effective tax break.
“Markets have shown a degree of calm over the last few weeks – it could be that they have already started to look through the conflict to a time of greater certainty, higher risk appetite and stronger economic growth.”
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