Societe Generale Private Banking (SGPB) expects a solid global growth ahead driven by the US and emerging markets as the Eurozone experiences deflationary pressures, the bank has revealed in its 2015 macro investment outlook.
Alan Mudie, head of investment strategy SGPB, said in a press briefing in London : "The Eurozone will see deflation, prices will fall in the first quarter of 2015, but will perform better in the second quarter of 2015."
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As the European commission statistics bureau, Eurostat, has announced, the Eurozone has fallen into deflation for the first time since October 2009, especially dragged down by the record fall in oil prices.
SGPB spoke about ‘desynchronisation’ to describe the diverse and divergent economic performance across the board estimated for 2015.
Although the outlook for the Eurozone appears gloomy, SCPB said the UK "will still be better than the rest of Europe" though it will experience a "less solid growth compared to 2014".
Compared to 2014’s outlook, the French bank is positive on emerging markets’ (EM) forecasts, with Asia-Pacific being the most attractive region, especially for equity investments, SGPB said.
SGPB also noted that the contribution from EM to global GDP growth increased from less than 40% in 1981 to more than 70% over the projection horizon.
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By GlobalDataAccording to SGPB, Japan’s future looks brighter due to the government’s recent reforms and will substantially contribute to the rise of the global growth.
For instance, China experienced a 7.3% GDP growth as of September 2014, undergoing a ‘structural growth shift’, though the growth level was still the slowest it has been in five years.
Diversification a must
As portfolio strategy, SGPB highly advised investors to diversify and be selective in 2015.
Claudia Panseri, global strategist at SGPB, said a big theme for the years to come will be the shift in EM bonds from countries producing oil to countries consuming it.
Another big shift has been forecasted towards the US (financial, tech and manufacturing sectors), UK, Swiss and Nordic countries’ stocks, rather than the rest of the Eurozone.
Panseri is positive on high yield bonds (short duration) in the Eurozone while remaining neutral on the US exposure for the same asset class.
On the other hand, she has a negative outlook on Latin American and Russian equity markets. Compared to other emerging markets, these commodity exporters will see a worsening current account deficit and negative profit growth as a consequence of oil price shocks, the bank said.
