CHICAGO – Ron O’Hanley, Fidelity Investment’s 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 Morningstar’s head of global research Scott Burns, at the Morningstar Investment Conference on Friday.

Here are O'Hanley’s views on some of key trends for the rest of 2013:


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, O’Hanley said.  “We’re seeing real change in these Japanese companies.”


Despite some positive numbers, unemployment is “still a red light,” O’Hanley said. The unemployment situation is getting better, but it’s “painfully slow” -- too slow for this country, he added.


After a rapid rise in corporate earnings, growth is likely to slow making this a red light in the short-term, O’Hanley said. “We don’t think they’ll 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, O’Hanley said U.S. fundamentals are very strong and will likely be buoyed by recovering consumer demand and the U.S. increasing exports.


O’Hanley 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,” O’Hanley said. “It’s 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,” O’Hanley said. “We don’t see it in the near term.”


U.S. consumer sentiment is very sensitive to headlines, O’Hanley noted. While the consumer is showing some resilience, “I don’t think it’s healthy to see 70% of the economy relying on the consumer demand,” he said.

In the medium-term O’Hanley 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,” O’Hanley said. “We’ve taken way too long to work through the aftermath of 2008 and politics as opposed to reason has taken it over. It’s been terrible for investors, for advisors, for everybody.”

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