Gattiker said monetary policy outside Europe and Japan has become too tight, particularly in many emerging economies.
“The comeback kid this summer is Europe − both in terms of economic growth and asset prices,” he said. “We expect this to continue given the divergence in monetary policies globally. Outside Europe, which is a cyclical growth story, investors may want to look into superior growth franchises for the longer term.”
Unless we see ‘major policy easing’ in emerging markets or the Fed refrains from tightening, ‘growth scarcity’ will ensue and this favours Europe’s ‘catching up’ efforts and long-term growth prospects, Gattiker explained.
“Instead of European stocks going belly up on Greece, the baton has been passed to commodity and emerging markets,” Gattiker said. “By hiking rates – or only thinking it out loud – the US Fed is calling its dollars home. This puts pressure on global growth through various channels: trade financing and commodity prices are affecting anyone in related industries and countries, and the lack of demand there has second-round effects on trading partners.”
“Hence, both growth and inflation are under pressure globally,” Gattiker added. “Europe and Japan with their reflation efforts can hardly fill in for all that is lost elsewhere. So let’s face it; growth is a scarcity, possibly well into 2016.”
