CHICAGO Ron OHanley, Fidelity Investments president of asset management and corporate services, laid out his take on a number of economic trends through a game of red light/green light led by Morningstars head of global research Scott Burns, at the Morningstar Investment Conference on Friday.
Here are O'Hanleys views on some of key trends for the rest of 2013:
JAPANS RECOVERY GREEN
The focus on quantitative easing overshadows another trend: Japanese companies have dealt with 30 years of a deflationary, no growth economy and are stronger for it, OHanley said. Were seeing real change in these Japanese companies.
Despite some positive numbers, unemployment is still a red light, OHanley said. The unemployment situation is getting better, but its painfully slow -- too slow for this country, he added.
CORPORATE EARNINGS GROWTH (PROBABLY) RED
After a rapid rise in corporate earnings, growth is likely to slow making this a red light in the short-term, OHanley said. We dont think theyll go down, but growth will moderate in the short-term. At the same time, the global economy in aggregate is so-so he added.
However, in the medium-to-long term, OHanley said U.S. fundamentals are very strong and will likely be buoyed by recovering consumer demand and the U.S. increasing exports.
EUROPEAN FINANCIAL CONTAGION GREEN
OHanley said the European financial contagion is green, relative to where it was before, thanks to greater certainty. We know that uninsured depositors will have to pony up, OHanley said. Its a much clearer picture now.
Despite a lot of stimulus spending and some experts pointing to inflation lurking on the horizon, inflationary pressure is still not there, OHanley said. We dont see it in the near term.
CONSUMER SENTIMENT GREEN (FOR NOW)
U.S. consumer sentiment is very sensitive to headlines, OHanley noted. While the consumer is showing some resilience, I dont think its healthy to see 70% of the economy relying on the consumer demand, he said.
In the medium-term OHanley called it a green light, but a wobbly market or negative jobs report could easily push that to red, he said. Our biggest obstacle is on the legislative, regulatory and policy side, OHanley said. Weve taken way too long to work through the aftermath of 2008 and politics as opposed to reason has taken it over. Its been terrible for investors, for advisors, for everybody.
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