Dominic Rossi, Global Chief Investment Officer at Fidelity International, suggests that at the same time as financial conditions ease, it’s becoming increasingly clear that developed economies have actually weathered the effects of the third wave of deflation pretty well.
Key Quotes
“Yes, we have seen a volume and price shock in traded goods and industrial production but the US domestic economy has continued to perform well, and the Eurozone and UK have also held up reasonably well. In my view, the fears of only a few weeks ago that the US might enter a recession were greatly exaggerated.
Instead, I believe we should now enjoy a period of stable growth with benign financial conditions providing the platform for a new up-leg in equites, once again led by the US stock market.
A Chinese devaluation would be a risk to this thesis, potentially supplying yet another deflationary wave, but this risk appears to have materially subsided. The recent bounce in emerging markets and commodities from distressed levels will most likely fade as both areas still face pressing structural challenges, which will take years to work through. Instead, I see leadership reverting to those areas least impaired by recent developments; that is the sectors with high levels of intangible assets and intellectual property, such as information technology and healthcare.”
(Market News Provided by FXstreet)
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