UK - Standard Life Investments is forecasting positive equity returns despite higher oil prices and a mixed business environment.
The asset manager said that while markets had suffered from fears of higher interest rates, a slowdown in China and a continuing high oil price, it believed equities would continue to perform well as corporate profits grew.
Head of global strategy Andrew Milligan said: “In a world of low inflation, oi price movements are the equivalent of an energy tax. The spike in oil prices was a material factor in several global recessions in the 1970s and 1980s - hence, the anxiety about the increase in energy costs during 2004.”
But Milligan believes the economic conditions are now very different from those in the 1970s and 1980s because:
- Energy use is now much lower in relation to national income. - Oil prices are still far below their peak in real terms.- Currency strength has partly offset the impact in countries outside the US.
But while the current situation is very different from the 1970s, Schroder Investment Management global energy analyst Craig Pennington explained that oil prices could remain high for some months yet.
He said: “We still see current prices as unsustainable and expect a correction of $15 a barrel during the second quarter of next year.
“That said subsequent near-term price falls to below $30 a barrel only look likely if we see a demand shock take place.”
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