Equity growth: Have you learnt the lessons?

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Equity growth: Have you learnt the lessons?

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The economic headlines this Monday look pretty grim – Japan in recession and the Eurozone not far off. Saxo’s Teis Knuthsen says the world may be experiencing an economic slowdown. But he points out that global equities have still risen by around 9% this year. What’s crucial, he says, is what happens after the slowdown.

Knuthsen points to two comparable periods of economic slowdown – 2004 and 2007. In 2004 he says the equity markets rose by around 9% - similar to what we are seeing in 2014. From 2005 they then increased by around 45%. In 2007 global equities also rose by just under 10%. But what followed in 2008 was a disaster for the markets - a 40% drop.

So what does he think will happen in 2015? Knuthsen believes the global economy will move gradually forward with growth driven by the US, China and to some extent India. He admits there will continue to be ‘pockets of weakness’ in places like Europe.

In terms of where he’s investing, Teis is bullish on both the US economy and the US dollar. Although Europe looks cheap, he says the outlook is still uncertain so he is investing in US equity markets.