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2012, May 23

Muddling Through in 2012 -- and a New US President

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Muddling Through in 2012 -- and a New US President

by BlackRock, 13 January 2012
topics:
Finance and Banking Risk Management
tags:
2012 economic forecast global economy US politics

Bob Doll is Chief Equity Strategist for Fundamental Equities at global investment manager BlackRock, which has US$3.3 trillion in assets under management. Formerly president and chief investment officer at Merrill Lynch Investment Managers, he is also Portfolio Manager of BlackRock’s Large Cap Series Funds.

 
Below are his predictions for 2012, which are based on his extensive experience and expertise as investment manager and the analysis of the BlackRock Investment Institute, a global platform that leverages on BlackRock’s expertise in markets, asset classes and client segments.
 
Europe’s debt crisis will begin to ease even through a mild recession
The European debt crisis loomed large and drove high levels of volatility in 2011, causing most risk assets to experience significant downturns.
 
Unfortunately, the debt crisis will continue to dominate risk discussions for 2012 as well. Thankfully, the authorities – political and monetary – moved from a position of complacence and inaction to one of irregular, but somewhat constructive action.
 
The ultimate path to a solution is unclear, particularly given the varied interests of multiple countries and constituencies. Formulating incremental fiscal union, creating the enforcement mechanisms for austerity measures, and attempting to generate economic growth are each difficult, and seem impossible when combined.
 
Nevertheless, we believe that all parties recognize the seriousness of the crisis and will continue to take enough action to avoid an outright catastrophe. In any case, however, it seems clear to us that Europe’s problems are significant enough to drive the region into a (hopefully mild) recession in 2012.
 
The US will muddle through yet again
The US economy ended 2011 stronger than it started, although growth continues to be lackluster. Our view is that the deleveraging process will continue to limit growth to a sub-par rate, but that recession will continue to be avoided.
 
A strong corporate sector, improving consumer sector, and financially strapped government sector will combine to give variable but positive growth for all four quarters of 2012, resulting in GDP growth of somewhere in the 2% to 2.5% range.
 
Modest employment gains are key to reversing the steady decline in corporate and consumer confidence. Low interest rates, a bottoming process in housing and low inflation could aid the economy in its .muddle-through.
 
We also believe that European recession and fiscal policy drags will become important headwinds.
 

China and India will account for more than half of global economic growth

Emerging market economic growth continues to be a critical part of global growth in both the short and long term. China and India are especially important given both their size and growth rates.
 
While growth in both countries is likely to be slower in 2012 than it was in 2011, together these two countries will account for more than half of 2012 global growth. We expect China will account for more than 40% of global growth, with India and the U.S. accounting for about 15% each.
 
Until recently, increasing inflation in the emerging markets has caused policymakers to raise interest rates and/or reserve requirements in an attempt to slow inflation, with the effort of dampening growth. We expect that process will begin to reverse itself sometime in 2012.
 
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Changes have been noticed in
Submitted by eva grainy on 23 April 2012 - 5:58am

Changes have been noticed in the corporate sector as well, but I have seen that companies have found their ways of consolidating position on the market, against all odds. The consumerization method has been a way of optimizing productivity by implementing more precise overview tools upon organizational activity. And along with it, a series of other methods that have used the online environment as a way of coping with the crisis.

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