|[January 08, 2013]
Prudential experts: Outlook brightens for equity markets in 2013, investors continue search for yield in debt markets
NEW YORK --(Business Wire)--
Prudential market experts are optimistic about the prospects for the
financial markets in the coming year as growth continues in the U.S. and
global markets stabilize. They outlined their views at Prudential
Financial, Inc.'s (NYSE:PRU) 2013 Global Economic and Retirement Outlook
briefing in New York today.
A replay of the outlook briefing is available on Prudential's
Ed Keon, managing director of Quantitative Management Associates, said
that distance from the recent financial meltdown has given markets and
the economy time to heal, leading to slow, but steady growth in 2012. He
expects the pace of growth to pick up in the U.S. and globally in 2013,
citing a healing labor market and more vibrant life in home prices, auto
sales and other economic measures.
"The title of an old Rolling Stones song, 'Time is on My Side,'
might help describe the global economy and equity markets in the last
few and perhaps the next few years. As more time passes since the
financial meltdown without another acute crisis, the healing of
personal, financial and corporate balance sheets, incomes and psyche has
proceeded," Keon said. "Growth has been slow, but steady, and we think
it will pick up in the U.S. and globally in 2013. Perhaps in 2013
Washington DC will be more like professional sports officials, guiding
and managing the action of the economy rather than dominating the
economy. Most folks find this hard to believe, but the U.S. equity
market has delivered 15 percent returns in 2012, and has averaged 10
percent returns over the past few years despite some ups and downs. That
looks like a bull market to us, and we think it will continue in 2013."
Quincy Krosby, a Prudential market strategist, noted that the search for
yield will remain global with investors seeking opportunity in emerging
market bonds, global high yield and Eurzone debt. She sees positive
trends in Asia such as economic stabilization in China that is expected
to increase demand for commodities, benefitting U.S. and European-based
global industrial companies. She also believes continued quantitative
easing in Japan will keep the yen weak relative to other currencies,
which should benefit Japanese exporters. Still, she says inflation
remains a concern.
"The second half of 2013 could have global investors discussing
impending inflationary pressures. With over 325 fiscal and monetary
measures of the last 15 months, and surely more to come, inflation will
begin to assert itself, most likely in the emerging markets," Krosby
said. "If the U.S. can find the right balance between austerity and
growth, job creation should pick up markedly in the second half,
bringing with it higher wages, credit demand and inflation, albeit a
modest uptick. Fingers crossed that we reach the point where we are
concerned with inflation, as long as it's associated with growth. But
that's a story for the latter part of 2013. Now we just have to get
through the first two quarters."
John Praveen, chief investment strategist for Prudential International
Investments Advisers, also expects continued growth in 2013, noting that
central bank liquidity and improving risk appetite should enable global
stock markets to post 10-15 percent gains with several global stock
markets, including the U.S., likely to reach new all-time highs.
"Global equity markets are likely to post further gains in 2013 driven
by abundant central bank liquidity and low interest rates, further rate
cuts and expansion of quantitative easing and central bank asset
purchases, continued stabilization in the Eurozone and easing risk
aversion and modest GDP rebound in emerging economies and in the U.S.,"
Praveen said. "Reasonable valuations and an expected earnings rebound
after weakness and disappointment in 2012 should also contribute to
global equity market gains in 2013."
In the fixed income markets, Michael Lillard, chief investment officer
of Prudential Fixed Income, agrees investors will continue the search
for yield and said although 2012 appeared bland on paper; it actually
proved to be a bright year for the spread sectors. He believes the
demand for bonds will continue in 2013.
"The combination of low growth and inflation, combined with high demand
from pension funds, retail investors and of course, the Fed, was a
formula for low Treasury rates, and declining spreads across fixed
income sectors in 2012," Lillard said. "In a world where demand for
bonds remains strong, but developed country de-leveraging both
constrains growth and reduces supply, I believe the overarching theme in
fixed income will continue to be the search for yield."
George Castineiras, senior vice president of Total Retirement Solutions
at Prudential Retirement, agrees with the optimistic assessments of
Prudential's market experts. "I am upbeat about the growth opportunities
for the retirement industry in 2013 and beyond mainly due to favorable
long-term demographics and the more than $18 trillion in retirement
assets that will be put into play over the next two decades,"
Prudential Financial, Inc. (NYSE: PRU), a financial services leader with
approximately $1.005 trillion of assets under management as of September
30, 2012, has operations in the United States, Asia, Europe, and Latin
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