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| Christian Menegatti, Managing Director & Head of Global Economic Research, Roubini Global Economics, a speaker at the marcus evans Foundations & Endowments Investment Summit Spring 2012, on investing in emerging markets. |
NEW YORK, N.Y., May 10, 2012 - (ACN Newswire) - The US economy is showing signs of growth, but there is plenty of internal and external risk factors to keep Chief Investment Officers (CIOs) of foundations and endowments at guard, says Christian Menegatti, Managing Director & Head of Global Economic Research, Roubini Global Economics. In the meantime, emerging markets are proving lucrative, but they should not be lumped into one category when they have very different characteristics, potential growth rates and political risk, he adds.
A speaker at the marcus evans Foundations & Endowments Investment Summit Spring 2012, in Wheeling, Illinois, July 23-25, Menegatti, from one of the world's leading economic and market research firms, talks about the US recovery, the Chinese economic slowdown and emerging market investment opportunities.
- What are your predictions for the US economy?
The US economy has shown good signs of strength, especially in the labor markets. If one wants to be optimistic, one could argue that this could trigger a positive feedback loop and lead to stronger growth. We still predict a two per cent growth rate for 2012 and slightly lower for 2013.
We cannot look at the US in a vacuum as there is still plenty of external risk. Oil prices are rising dangerously and the Eurozone is a significant external risk. A tightening of credit conditions in Europe could have a negative impact.
In terms of internal risk, the US is undergoing a deleveraging process mostly in the private sector, but it will eventually have to deal with an unsustainable fiscal outlook. The question is if the forthcoming fiscal drag will be offset by strong growth in the private sector as payroll tax cuts, unemployment benefits and the recovery package are all expiring by the end of the year. This could tilt the US economy into a recession.
- What impact will the US Presidential elections have?
The US has shown a significant increase in polarization and political risk inside its system, which will not change after the elections. The Republicans are not in favour of further spending, while the Democrats would prefer to address the deficit later rather than sooner. If the expiring programs are not extended, it could lead to a US recession or fragile recovery.
- How should CIOs invest in this environment?
Although volatility is low, CIOs cannot count on cash, government bonds or safe investments. They need to study past deleveraging cycles and how policies impacted growth. In the short term, they must focus on where the vulnerabilities and solvency problems exist, and hedge against risks. They should consider assets in emerging markets with strong fundamentals and demographics, and potential productivity gains.
- What implications will the Chinese slowdown have on the US economy?
China is one of the largest contributors to global growth, although subsidized by its government. We cannot predict if the Chinese slowdown will have a soft or hard landing, but the effects will be global.
- Any final words of wisdom to CIOs?
CIOs have the opportunity to broaden their investment spectrum towards economies that were not necessarily part of the investment mix before. The opportunity here is to learn to be more selective and not to lump emerging markets into one category, as they have very different characteristics, potential growth rates and political risk.
About the Foundations and Endowments Investment Summit Spring 2012
This unique forum will take place at the Westin Chicago North Shore, Wheeling, Illinois, July 23-25, 2012. Offering much more than any conference, exhibition or trade show, this exclusive meeting will bring together esteemed industry thought leaders and solution providers to a highly focused and interactive networking event. The Summit includes presentations on the rebounding investment market, developing innovative asset allocation strategies and forging groundbreaking tactics for the future. For more information please send an email to info@marcusevanscy.com or visit the event website at www.foundations-endowmentssummit.com/ChristianMenegattiInterview
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