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According to data from JP Morgan global is coming back to life once again, as central banks keep their balance sheet elevated.
- Monetary stimulus by Federal Reserve, European Central Bank and Bank of England has boosted their economy prompting return of global growth. While PMI output index is hovering close to 2%, GDP growth is yet to reach the level.
- Global economic growth accelerated for three consecutive month in March and has reached six month high.
- However, despite large scale monetary stimulus, growth in Japan is still lagging.
How to play the return of growth?
- To some it might still be far-fetched, however investors should prepare for higher inflation in the horizon, which would have run high by now, should the oil and commodity prices stayed at previous year's level. Inflation linked bonds might return in favor, after long years of disinflationary pressure.
- Companies after benefiting from monetary stimulus will continue to benefit from return of global growth. Equities might still be the best asset class to invest in. However volatilities will remain elevated.
Challenges -
- Greater challenges will be faced by the central banks, as they remain a mighty force in financial markets with large balance sheet to offload. Offloading the securities without hampering economic activities will be a daunting task.
- Emerging markets in part, still remains vulnerable to stimulus withdrawal.
