Barclays recommends investors look to the euro area and Japan
March 26 2015 - 8:00AM
Business Wire
Global Outlook report sees lower inflation and easier monetary
policy providing further support to financial asset prices
The dramatic shifts in energy prices, the US dollar and monetary
policies should help to extend the benign market environment seen
during this economic recovery, according to Barclays’ latest
flagship quarterly research publication Global Outlook: Oil, the
dollar and monetary policy: it’s all (or at least mostly) good.
“The plunge in oil prices reduced inflation even further and
encouraged additional monetary easing,” said Larry Kantor, Head of
Research. “This pushed bond yields even lower and boosted economic
growth, which in turn should provide continued support to stocks
and corporate bonds.”
The surge in the US dollar has been largely constructive for the
global economy, as it redistributes growth and inflation from the
US – where excess capacity has shrunk and monetary policy is set to
tighten – to the euro area and Japan, where there is still ample
excess capacity and deflation is a greater threat. Lower inflation
and a stronger US dollar also means the US Federal Reserve can now
be more cautious about raising rates than it otherwise would have
been, allowing markets to continue to perform well.
Among developed economies, the euro area and Japan should be
clear beneficiaries, gaining from lower oil prices, weaker
currencies and extreme monetary support. Partly as a result, we
believe that stocks in those countries will continue to outperform.
Emerging Asia has also benefited from recent market changes,
central bank interest rate cuts, and still-strong global technology
demand.
However, not all countries and regions are beneficiaries. China
has resisted currency depreciation and continued to rein in credit
expansion and excessive investment, placing downward pressure on
its economy. Latin America, where many countries export
commodities, has suffered from the weakness in commodity prices as
well as capital outflows due to the strength in the US dollar and
the anticipation of US Federal Reserve rate hikes.
Other recommendations in the Global Outlook include:
- Maintain a neutral balance in
portfolios between stocks and bonds
- Overweight euro area and Japanese
stocks
- Favor a combination of dividend and
growth stocks in the US
- US dollar still has some upside, but
the pace is likely to be slower
- Oil prices are likely to remain low for
at least several months
Barclays’ Global Outlook research report, published quarterly,
provides an assessment of all major economies and outlines the
likely implications for global financial markets.
Barclays is an international financial services provider engaged
in personal, corporate and investment banking, credit cards and
wealth management with an extensive presence in Europe, the
Americas, Africa and Asia. Barclays’ purpose is to help people
achieve their ambitions – in the right way. With 325 years of
history and expertise in banking, Barclays operates in over 50
countries and employs over 130,000 people. Barclays moves, lends,
invests and protects money for customers and clients worldwide. For
further information about Barclays, please visit our website
www.barclays.com.
Barclays CapitalJames White, +44 20 7773
2800James.white@barclays.comorErica Chase, +1
212-412-6830erica.chase@barclays.com
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