Search for Growth
Balancing Yield and Risk in Uncertain Times
The third annual BNY Mellon-sponsored Search for Growth study of investor sentiment spotlights concerns about income inequalities and structural weaknesses despite growing confidence in short-term global recovery. The Economist Intelligence Unit (EIU) surveyed 730 top institutional investors in January 2013 about their expectations for the global economy. This year's survey results, as well as year-over-year shifts in investor outlook, are captured in Search for Growth: Balancing Yield and Risk in Uncertain Times.
Survey respondents were overwhelming optimistic about short-term gains for the global economy. Nearly three-quarters (72 percent) of investors expect global economic expansion this year, a significant increase compared with the 2012 survey, when 57 percent expected global growth. Many are betting on a strong U.S. recovery led by housing, manufacturing and energy. Others are less sure, viewing the U.S. as "the best of a bad bunch" of developed countries saddled with unsustainable debt, weakening infrastructure and growing income disparities. The majority of investors agree that income disparities threaten global capitalism.
Other key findings include:
- Investors are still bullish on China, yet they are increasingly looking to the U.S. and a wider range of emerging markets to boost returns.
- 52 percent of investors also think that the U.S. economy will be bolstered by a revival in the housing market with more, 73 percent, saying that this scenario would have a positive impact on portfolios and businesses.
- Globally, investors are most optimistic about quick returns in sectors such as oil and gas and agribusiness. But their bullishness on commodities has waned since 2011, the year the annual survey was launched.
- Investors expect the highest returns from equities this year. Meanwhile, with sovereign debt burdens still rising across much of the OECD, government bonds have been called into question.
- Despite positive forecasts, a staggering 65 percent of investors agree with the following statement: "Rising income disparities pose a threat to global capitalism."
To learn more about investors' views on the prospects for growth in the coming year:
- Download Balancing Yield and Risk in Uncertain Times*
- Read the Executive Summary
- Access the research study press release
BNY Mellon and the EIU have produced several other papers as part of our three-year Search for Growth research partnership. Additional information on papers published in 2012 as part of the series appears below.
Fiscal Decision Time for Political Leaders
The U.S. and European economies will face significant challenges in 2013 and beyond regardless of the scope and direction of imminent fiscal decisions globally according to the report, Fiscal Decision Time for Political Leaders. This December 2012 paper examines and details the diverse opinions of leading market watchers and participants.
Key findings include:
- Experts are divided on whether government leaders will make the tough fiscal decisions necessary to save their economies.
- Viewing the U.S. "fiscal cliff" as a binary event distorts what's likely to happen.
- The European economy faces two major uncertainties: Will European countries ever submit themselves to outside fiscal control? Will the European Central Bank cut off an ailing country from further support if it fails to meet conditions for its loans?
Central Banks in Uncharted Territory
In their ongoing response to the aftershocks of the global financial crisis, central banks are abandoning the narrow role they traditionally played in economic affairs. According to the September 2012 paper, Central Banks in Uncharted Territory, these institutions have greatly expanded their direct participation in financial markets, working to sway investor sentiment and restore confidence. Much of this shift has been reluctant, and arguably it is spurred by lack of government action to stimulate the global economy or correct structural imbalances. But many observers expect the changes to be permanent.
Key findings include:
- Most experts give central banks high marks for tempering what could have been a far worse global financial crisis in 2008.
- Experts say central banks are unlikely to pull back from the more prominent role they have carved out for themselves post 2008.
- While monetary easing will provide some relief, experts agree that central banks cannot restore a healthy global economy by themselves.
*The findings and views expressed in the EIU reports do not necessarily reflect the views of BNY Mellon.
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