World economic forecast 2014 affected by emerging market uncertainty

The world economic forecast for 2014 sees an American economy gathering pace, better-than-expected Eurozone growth.

However there is uncertainty regarding China and the emerging economies, says a new report compiled by Transwestern.

The author of the February edition of the Briefing’ report , Tom Mcnearney, says “clouds in China and emerging markets are creating uncertainty and threatening to derail growth both in the US and abroad.”

According to Deutsche Bank, GDP (gross domestic product) growth for the Eurozone is forecast to be 1% in 2014, compared to 0.4% last year.

The European Central Bank (ECB) cut its benchmark interest rate in November which should help boost economic activity.

World economic forecast maybe not affected by Fed tapering

The author was surprised at how small the reaction was to the Federal Reserve’s cutting of its bond-buying stimulus package. “This tapering-lite program combined with the projected economic growth is expected to create upward pressure on interest rates. Therefore, 2014 is going to be a bumpy road for stocks and bonds, particularly Treasuries and high-grade corporate bonds.”

Economic growth in the US this year should improve the fundamentals for commercial real estate, leading to superior cash flow and returns. Commercial real estate will remain attractive in 2014 for both equity and debt investors.

In spite of an increase in interest rates on 10-year Treasuries by almost 100 basis points, commercial real estate ended 2013 with a greater volume of sales and flat or lower capitalization rates.

Below are some highlighted data from the report:

  • In 2013 Dow Industrials increased by 27%.
  • NASDAQ composite was up 38% in 2013.
  • Last year the S&P 500 reported a 32.4% rise in 10 sectors, a 160% increase compared to March 2009’s low.
  • Bonds worldwide fell 0.4% in 2013.
  • A 1.2% gain in corporate debt and 7% return in high-yield offset a 3.4% in US Treasuries.

‘The Briefing’ was written by Transwestern’s Chief Investment Officer, Tom McNearney.

Last week, Eurostat, the European Union’s statistical office reported that Eurozone GDP grew by 0.3% in the last quarter of 2013, the third consecutive quarter of economic growth.

Data coming out of the US over the last few months suggest the country’s economic recovery has been gathering speed. However, some reports regarding December and January have been disappointing.

US retail sales in January fell compared to December. Analysts say that particularly severe weather conditions may have kept people at home more, i.e. they went shopping and eating out less. Job growth and personal income increases have also slowed down.

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