The International Monetary Fund (IMF) has issued growth forecasts for many of the world’s leading economies and expects the next year will be a bumper year for most.
Among the hoo-ha from governments bragging about their economic policies by inferring the IMF justifies their policies; investors want to know how they can benefit from the news.
Overall, the IMF expects global growth to nudge up to 3.7%.
“Global growth is expected to increase in 2014 after having been stuck in a low gear in 2013,” said the IMF report.
“The euro area is turning a corner from recession to recovery.”
The predictions
The IMF 2014 growth forecasts include figures for these economies:
- US 2.8%
- Germany 1.6%
- France 0.9%
- Italy 0.6%
- Spain 0.6%
- UK 2.4%
- Canada 2.2%
- Russia 2%
- China 7.5%
- India 5.4%
One analyst, Stephanie Flanders, the BBC’s former chief economic correspondent and now working for US bank JP Morgan, expects 2014 to become ‘showtime’ for the global economy.
Advice for investors
And as part of her thinking, has put forward three rules for investors to follow:
- Rebalance portfolios – The markets are set to change and even if the past 12 months returned a good performance, the likelihood is investors need to consider rebalancing their holdings to maintain their record
- Select the best – Many US opportunities are not cheap, but with Europe re-establishing reasonable growth, many companies there may offer better value than those elsewhere.
“Emerging markets still look a worthwhile investment,” she said. “But it’s important to take a long-term view of the market and growth is slowing in some emerging markets and others are rising stars.”
- Expect the unexpected – The IMF warns that prospects for growth look good, but governments still have to keep a firm hand on the tiller of their economies to steer them out of fiscal difficulties.
“Investors have experienced above average returns in recent years,” she said. “But they would do well to expect a bumpy ride over the next 12 months.”
Generally, investors should look for evidence that their money is going to work hard for them wherever they invest, she explains.
“One of the key factors for investors is how the US Federal Reserve handles the fiscal taper and how this might affect markets around the world,” she said.
“The assumption is the taper is coming and interest rate rises are waiting in the shadows, but no one is quite sure how and when the markets will react, even though they seem to have absorbed the early indications without too much of a problem.”
