The fiscal cliff will not choke off US growth in 2013, according to Stefan Keitel, Chief Investment Officer of Credit Suisse. Cautious optimism also for Europe. "The aggressive measures by the central banks are effective," as Keitel says in the video interview.
The most salient points (please click on the above image for the full video interview):
Long-term effectiveness of central bank measures
- The central bank measures lower the financing costs of businesses, consumers and not
- least also of the heavily indebted nations, and thus influence growth directly.
- The determination evident behind the measures also has a psychological effect and strengthens trust in the markets.
US Fiscal Cliff in the US – solution independent of election results
- The "full" fiscal cliff – i.e. the expiring tax cuts and the spending cuts – corresponds to about 4% of the 2013 US GDP.
- A political compromise is probable and should limit the effect to 1 – 1.5% of GDP.
- This results in a growth estimate – including various positive factors – of 2 – 2.5% for the US in 2013.
Weaker Chinese growth doesn't set off alarms
- In spite of weaker growth the Bank of China was hesitant at first, but the lower inflation numbers now enable it to act more aggressively.
- Positive signals were increasingly prevalent in the past few weeks, e.g. a Purchasing Managers Index (PMI) close to 50.
- Our soft landing scenario seems confirmed. We expect growth around 7.5 – 8% in 2013.
Equities remain attractive, bonds suffer and gold profits
- Risks remain, but are well known and therefore mostly priced in.
- Setbacks on equity markets should generally be understood as buying opportunities.
- Bonds are not necessarily dangerous, but don't have much upside potential either. Corporates and especially high yield or emerging market bonds are the most interesting.
- The negative real interest rates are the driving factor behind the gold price. Here as well, the current dip is a buying opportunity.
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