International Business Opportunities
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Written by tolumi
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Friday, 05 December 2008 10:40 |
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International Business Opportunities With the usually strong US beginning to look a little shaky, Alaric Nightingale takes a closer look at which markets will benefit most For a few years now, America, the undisputed heavyweight economic champion of the world, has been acclaimed for creating a new economic paradigm. The paradigm is simple: low-but-consistent inflation coupled with strong growth that would continue forever.
Lately, though, three things - high oil prices, slackening output and an uncertain political climate - have cast doubt on the new model’s robustness. International Business Opportunities & The Asset Managers Asset managers are forecasting shrinking growth and increased volatility in the US as the economic mood swings to gloomy. In November and December, admitedly during the US election crisis, the euro made its first sustained progress against the dollar. Fortunately, the high oil price has eased off, as has the political uncertainty, leaving only the slackening economy for us to worry about. The fundamental issue George W Bush, the new president, must balance is slackening economic output while at the same time servicing the US’ large financial deficit. The cut in the interest rate suggested by Al Greenspan helped spark the markets overnight, but the investment community seems unconvinced. An important issue is whether any rate cut can do enough to enliven the US economy. International Business Opportunities & Gary Potter “We were pleased to see the macro change in America,” says Rothschild director Gary Potter (about the likely introduction of rate cuts). “But there are still some concerns because the economy is slowing.” Potter believes that, although the Nasdaq underwent heavy surgery for the best part of 2000 (and particularly in November and December), it is far from certain the index has hit rock bottom.
Consequently, the uncertainty in the Nasdaq reflects Rothschild’s flat position in Asia. “One concern about Asia is that it is very strongly linked to the Nasdaq,” Potter says. “But we also accept that opportunities are showing up there because some stocks have fallen 30, 40 or 50 per cent. If you don’t believe the world is coming to an end, some of these stocks look attractive.”
The flip side of Rothschild’s neutrality in Asia and Japan, and an underweight position in the US, are overweight positions in the UK and Europe. Rothschild reckons the UK’s relative under-performance over the past two years is due to be rectified. International Business Opportunities And Corporate Restructuring Potter believes corporate restructuring in mainland Europe will produce strong results for Euroland companies. Overall, Rothschild expects the global economy to be reasonably stagnant until March/April next year when the markets, particularly Europe, start to strengthen as tax cuts kick in. Potter says he is “cautiously optimistic” for the world because of the room most major economies have to stimulate growth through tax cuts. Ashburton is holding around 32 per cent of its assets in equities (it has a rule that half must be held in bonds), a position that global investment stategist Peter Lucas describes as neutral. Lucas says: “We still feel there is lots of medium-term risk. There is still risk to equity markets but, in the short term, there is a good chance of a year-end recovery that could run into the new year. It is a question of balancing the risk with the reward. 
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Last Updated on Tuesday, 06 January 2009 14:20 |
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