Some economic predictions for the upcoming year from the leading financial experts on matters related to the risk factors posed by China, US treasury yields, US equity market returns, global energy prices, and the some of the more promising countries from LatAm.

 

• Recession in China

Ruchir Sharma, head of emerging markets, Morgan Stanley Investment Management, concludes that we are one big shock away from a global downturn. He considers China as the country posing the highest level of risk because of its reliance on debt, excessive investment, and a declining population that undermines growth. He considers low-debt countries from Eastern Europe and South Asia as being in a better position to tackle or weather any negative shock.

Yang Zhao, chief China economist at Nomura Holdings, disagrees. Although Yang reduced China’s 2016 GDP forecast to 5.8 percent from 6.7 percent, he does not expect a hard landing in China because he expects the Chinese economy to create jobs, especially in the labor-intensive services sector. He does not expect a financial crisis in China because most of the country’s institutions are backed by the government.

• Fixed Income Rates

Dan Fuss, vice chairman at Loomis Sayles & Co. and co–portfolio manager of the $20 billion Loomis Sayles Bond Fund expects yields on the benchmark 10-year Treasury note to hover around 2.6 to 2.8 percent by the end of 2016.
Jim Caron, a managing director at Morgan Stanley Investment Management, believes that, because of expected inflation risk, 30-year Treasury yields might hover around 3.75 percent.

• Surge in the Equities

Thomas J. Lee, managing partner at Fundstrat Global Advisors, expects equities to outperform in 2016. Lee expects outperformance by banks and blue-chip businesses. Banks are expected to benefit from the Fed tightening while blue chips are expected to do well as the economy picks up.

• Play on Energy

Barbara Byrne, vice chairman of investment banking at Barclays Capital, expects a recovery in the prices of natural resources for largely political reasons. She expects oil prices to stabilize at about $60 per barrel.

• Latin America

Tulio Vera, chief global investment strategist for the J.P. Morgan Latin American Private Bank, is very optimistic about Argentina. He also believes that Mexico will benefit from the U.S. economic recovery, especially in the auto industry.

November 23, 2015; 7P

http://www.bloomberg.com/news/articles/2015-11-20/14-predictions-for-2016-from-the-brightest-minds-in-finance

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