Resurgent fears about Europe, along with slowing growth in emerging markets and uncertainty over the US presidential election, drove investors to a “risk-off” position in the second quarter. However, while today’s challenges are “real and consequential” they are not insurmountable, Pitcairn said in its economic and market commentary.
June saw the most “draconian” of European forecasts abate as Greece elected politicians willing to work with the European Central Bank, the firm said. Ultimately, global stock markets declined, with nervous investors favoring the US, where the stock market lost just 3.1 per cent for the quarter compared to losses of 8.8 per cent and 7.1 per cent in emerging markets and Europe respectively.
Although progress in healing the European situation has been “painfully slow,” Pitcairn noted that there is a world outside the European “melodrama” which deserves global investors’ attention.
The long-term prospects for the developing economies of Asia and Latin America are bright. However, in the short-term, “eyes have turned to the economic slowing in China.” Export growth will slow, the firm predicts, as China has “bowed to pressure” - largely from the US - to let its currency drift up from “artificially low levels.”