TORONTO, ONTARIO and CHICAGO, ILLINOIS--(Marketwire - May 11, 2012) - BMO Harris Private Banking is projecting a year of global economic growth and moderate, positive equity market returns that outperform weak but positive fixed income returns, according to its April Market Commentary Report.
"Although there remain a number of ongoing concerns about credit conditions in the eurozone, the pace of the U.S. economic recovery, and the ability of China's leaders to control growth, we are optimistic that these will cause only periodic slowdowns and will not have a larger or sustained negative effect," said Paul Taylor, Chief Investment Officer, BMO Harris Private Banking & BMO Asset Management.
Modest Growth Expected for U.S. Economy
The BMO April Private Banking Report states that the tone of U.S. economic data released during April was slightly weaker than in the past few months. "Real GDP for Q1 was slightly lower than market expectations at 2.2 per cent, but still relatively good for a recovery that is unfolding in the shadow of a major debt overhang," said Jack Ablin, Chief Investment Officer, Harris Private Bank. "We anticipate the U.S. economy will grow at a modest pace, with particular strength in manufacturing."
Ongoing Troubles in eurozone
The report notes that the political uncertainty over potential changes in eurozone governments and their commitment to fiscal austerity has been a general concern for market participants. "We believe that the eurozone situation will improve and that the risks posed by the sovereign credit crisis will diminish," noted Mr. Taylor. "We do, however, expect there to be further noise from the eurozone, including political upheavals, civil unrest and perhaps even the departure of Greece from the monetary union. Ultimately, we continue to believe that policymakers have the will and ability to prevent systemic damage to the global financial system."
Positive Outlook for Equity Markets
While the report predicts equity markets will have positive returns over the next year, a slow summer is anticipated given the issues in the eurozone and market reaction to the U.S. election process which is gearing up.
"We believe that the U.S. economy will be the key driver of capital markets in the coming year, despite occasional overseas distractions," stated Mr. Ablin. "The overhang of debt and upcoming fiscal challenges in the United States, coupled with it being an election year, means we can expect further periods, like April, when the recovery process is somewhat distracted. We will be watching for opportunities to add to our allocation to U.S. equities at attractive valuations."
The full report can be found at: bmo.com/harrisprivatebanking.
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