The Long, Hard Slog Continues
Historically, as many of our readers are aware, the focus of these pieces from Scout Investments has resided in the U.S. We have long written on our outlook for the U.S. economy and markets, and will continue to do so. We launched our formal Global Equity product in the fourth quarter of 2008 (good timing!). Since then, we have focused not only on the U.S. outlook but also on leveraging our considerable expertise in the foreign markets to the advantage of our Global product. With this in mind, this piece represents our first Global Economic and Market Outlook.
As has historically been the case from a domestic standpoint, our Global Economic and Market Outlook discipline will consider:
Projected GDP growth on a regional basis Projected inflationary pressures Central banking activities and potential ramifications of those activities Expected corporate profit momentum and sustainability Relative equity market valuation Regional political stability
It is in this spirit this piece is offered. Please find below bullet points, summarizing our view of the economic and market drivers we expect to unfold as we wind through the second half of 2011, and head into 2012.
The Final Word
From a macro-economic viewpoint, we believe the world’s economic environment will not only stay out of an overall contraction, we believe growth should accelerate as the second half unfolds, as compared to the first half. With this in mind, corporate revenues and profits should remain positive. Due to slack in the productive capacity side of the economy, inflationary pressures should remain subdued. Central banks activity has been mixed, and will probably continue to be so. We expect the U.S., Japan and many areas of the developing world will lead the growth parade for the remainder of 2011. Europe will probably lag.
At the end of the day, growth should be positive, but the question dogging the major developed economies (U.S., Japan and Europe) will continue. This area of the world represents 58.0 percent of worldwide economic power. The “meat of the coconut” in these areas, is the definition of the role of government. What do the peoples of these areas expect and demand from their governments? This question is being answered. As this question is being answered, the focus of the world’s investors at times shifts towards the “balance sheet” side of the economic question. When this occurs, the markets swoon. This will not go away until this question – what is the proper role of governments – is answered.
William B. Greiner, CFA
President & CIO
Lead Portfolio Manager of Scout Global Equity Fund