US Economy A "Key Driver" Of Capital Markets In Coming Year - BMO Report

Eliane Chavagnon

11 May 2012

Although US economic data released in April was “slightly weaker” than previous months, BMO Harris Private Banking nonetheless anticipates the economy to grow at a “modest pace,” with notable strength in the manufacturing sector.

In its April Market Commentary report, BMO foresees a year of global economic growth and “moderate” positive equity market returns that outperform weak - but positive - fixed income returns.

“Real GDP for Q1 was slightly lower than market expectations, at 2.2 per cent, but still relatively good for a recovery that is unfolding in the shadow of a major debt overhang,” said Jack Ablin, chief investment officer, Harris Private Bank. “We anticipate the US economy will grow at a modest pace, with particular strength in manufacturing.”

Albin added that the US economy will be the “key driver” of capital markets in the coming year, “despite occasional overseas distractions.”

However, a combination of fiscal challenges and the fact that 2012 is a US election year means that periods of “distracted” recovery, as noted in April, are likely.

Specifically, the report predicts a “slow summer,” owing to ongoing troubles in the eurozone, as well as market reaction to the US election process.