Global Market Outlook

GLOBAL MARKET OUTLOOK

Indeed, there has been great pick up in global activity during this fiscal compare to previous year. IMF, OECD and ECB corroborate view that global GDP will grow by 2.8% at market exchange rates.  It is clear that market is facing a multi speed recovery. The global economic outlook being driven by more rapid rebound in emerging economies and accommodative macro economic policies such as fiscal stimulus, and an expansionary monetary policy and some extraordinary measures adopted to restore the functioning of the banking system. However these factors are temporary phenomena. Fiscal stimulus in US will impact soon in the face of sharp increase in government indebtedness. Central banks are beginning to tighten monetary policy by withdrawing the liquidity measures that had been injected in the market. However, the scope for the private sectors in developed economies to step in and replace the public demand is still limited while household and financial sector balance sheets are remain weak. So it will continue as long as credit growth remains sluggish and labor markets remain weak. As a result the recovery is likely to be a slow process in developed economies. But in emerging economies, demand has been increased during this fiscal but will it sustain? It is a million dollar question.      

It is my belief that rebalancing the global economy is critical for sustaining growth in the short term. But the health of the global financial system has improved since 2010. However, risks remain elevated due to the ongoing repair of the household and financial sector balance sheets.

Here is my bottom-line that the valuations in the public equity markets somehow overpriced and above its historical average. However, the outlook in the very short term is still uncertain and the future trend of the market may bearish.