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Global Economics Provides Reasons to Be Bullish, But Politics Poses Downside Risk
Despite headline-grabbing events in Washington, we remain bullish on a fundamental basis for U.S. and Japanese markets. We continue to see an overall picture of low inflation, low interest rates, easy money from national banks, strong corporate profits, and good consumer and producer sentiment. In the U.S., we see the wealth effect from housing and the winding down of the foreclosure crisis; in Japan we see the potential that Abenomics will still boost Japanese equities. We also see positive data points beyond the U.S. and Japan that suggest a wider medium-term optimism is warranted. China continues to show healthy growth and evidence of an economic rebalancing towards the consumer; Europe’s equities are attracting investor interest as Europe slowly emerges from crisis. Some Asian economies show signs of recovering from the summer’s turmoil and benefitting from the wider global recovery, and in Latin America, Mexico is poised to benefit from structural reforms to the energy sector.
Headwinds for biotech?
With some American jurisdictions approving the purchase of pharmaceuticals from overseas, we see near-term benefits and longer-term problems for the industry as the Affordable Care Act moves forward. The legislation will give health-care access to more consumers. But it may ultimately make it more difficult for pharma and biotech start-ups to recover their R & D costs if they face competition with government-controlled pharma prices from Canada or Europe. The orphan drug space could be particularly hard-hit.
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In Last Week’s Global Market Commentary We Discussed:
- Should we still be bullish on Japan?
- What about Venezuela?
- Driverless Cars Aren’t Coming — They’re Here
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