The global economy, at $62 trillion, is now larger than ever, it says, citing statistics from the
The growth won’t be evenly distributed around the world, though. Morgan Stanley Smith Barney expects emerging market economies to grow more than 6%, while developed market economies will grow at a slower 2%. Emerging markets will therefore account for three-fourths of global growth, it says.
For investments, the company remains overweight equities, commodities, REITs and inflation-linked securities; market weight emerging market debt and managed futures; and underweight cash and bonds. More specifically, within global equities, it sees the most value in emerging markets and commodity-sensitive economies like Canada and Australia. Within global bonds, it is overweight corporate debt, both investment-grade and high-yield, and underweight in developed market sovereign debt and short-duration debt.
As far as interest rates are concerned, the company expects “decent growth combined with very low inflation” in the developed countries to prompt central banks to keep policy rates steady until 2012. However, emerging market central banks will continue to hike policy rates to restrain strong local GDP growth and ease inflation pressures, it says.
Lee Conrad writes for On Wall Street.