Mensajepor Mr_Baca » Dom Ago 07, 2011 3:30 pm
DJ Goldman's O'Neill Doubts Stock Bull Run Is Over Despite Selloff
07-Ago-2011
-Developments in China could restart bull stock markets
-China, not U.S., Europe, will control destiny for world growth, markets in long run
-Rate downgrade is a blow to U.S. prestige but won't cause problems for Treasurys
-Yen, Swiss franc "ludicrously overvalued"
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The bullish forecasts for global equities that Goldman Sachs Asset Management Chairman Jim O'Neill made took a blow last week, when U.S. stocks saw their biggest selloff since the 2008 financial crisis. But he is not ready to throw in the towel.
Like many other market participants, O'Neill is getting more cautious about the global economic outlook, which has been tainted by disappointing data in the U.S. and the debt troubles in the euro zone. Adding to the toxic mix, ratings company Standard & Poor's cut the U.S. AAA rating for the first time in modern history, and many investors are worried about its potentially negative impact on financial markets and global growth.
"While there is no denying the loss of global economic momentum, and it is possible that the bull move since early 2009 is over, I still doubt it," said O'Neill in his latest newsletter released Sunday. "A fresh bull market move is likely to start when Chinese inflation has clearly peaked and their policy makers can move away from tightening policy."
O'Neill, whose views on the financial markets are closely tracked by many global investors, is best known for creating in 2001 the term "BRIC," the now-ubiquitous acronym for the four biggest emerging-market economies--Brazil, Russia, India and China--each of which is playing an increasingly significant role in the global economy.
Since the start of the year, O'Neill has been bullish on global stocks due to his optimistic outlook for the world economy. In an interview with Dow Jones Newswires in May, he said he thought the U.S. economic recovery would pick up speed in the second half after the soft patch earlier this year.
Yet he appeared to put his upbeat view down a notch lately, especially after U.S. economists Friday cut their growth forecast again for the world's largest economy--1.7% average this year, down from 1.8% previously forecast and 2%-2.5% for 2012, down from 3% originally predicted.
"I find myself starting to doubt whether the underlying trend rate of growth of the U.S. economy is indeed as robust as I had persuaded myself this past 12-18 months," said O'Neill.
Still, he emphasized his view that it is China, along with the other growth-market countries that "will control the world economy and its markets' destiny in the years ahead," even as the local challenges in the U.S., and especially Europe, "will feel bad and weigh on us all."
While O'Neill is not a big fan of U.S. Treasurys at their current high prices, he said the U.S. rating downgrade is unlikely to shatter the Treasury market's status as a haven.
"U.S. bond markets continued to benefit from global investor risk aversion during last week's panic, I am not sure that this news is really that important in the short term," said O'Neill. "It is certainly a blow to the prestige of the U.S. But, will this move cause problems for U.S. bonds? I doubt it."
O'Neill also said the yen and the Swiss franc are "ludicrously overvalued." The two favored safe-harbor currencies that have rallied sharply against both the dollar and the euro in recent months, though their strength was dented last week by measures from the Swiss National Bank (SNB) and the Bank of Japan (BOJ) to rein in their ferocious gain which undermines the two nations' export sectors.
O'Neill said that "both of their individual moves have been generally regarded as inadequate and insufficient to reverse their currencies, and in view of the S&P news after the Friday market close, this may be the correct judgment." But he said the two currencies are not good investments over the longer term.
"I am completely unsure as to where things will move next week or through the remainder of what could be a treacherous August. But looking into the autumn and beyond, I suspect that you wouldn't want to have stayed long either the Swiss franc or the yen," he said.