The Organization for Economic Cooperation and Development (OECD) reported on Wednesday that it expects India’s economy to grow by 7.7% in 2015, making it the fastest-growing major economy in the world. This puts India in a position to possibly outpace China, where growth is slowing to the government’s official target of approximately 7%.
Of course, India’s growth is not a proxy for international markets at large. However, it is one data point that helps support our optimistic view on economic expansion around the world as we head deeper into 2015. Other positive indicators that we are currently mindful of include:
- All major developed countries currently show PMI readings at or above 50.*
- Developed markets are showing improving gross domestic product (GDP) growth combined with easy monetary policy.
- Global GDP is expected to expand by 2.8% in 2015, on the heels of 2.5% growth in 2014. (Data: International Monetary Fund.)
This is not to downplay the realities posed by certain headwinds. There are traces of stubbornness in emerging market economies, particularly as several governments invoke tighter monetary policy to stabilize currencies. Continued low inflation is another concern, with the global consumer price index currently reading less than 2%.
On balance, however, we maintain a moderately optimistic attitude toward the coming quarters, keeping a broad perspective that includes international equities. For each of the past 30 years, the top-performing equity market has been outside the United States. Additionally, we keep in mind that non-U.S. securities represent an important, and large, investable market, accounting for roughly half of total global market capitalization.
*The Purchasing Managers’ Index, or PMI, is published by Markit Group. The index measures the health of the manufacturing sector within country or region. An index reading above 50 indicates an expansion within the sector, while a reading below 50 indicates contraction. Current readings for the United States, the euro zone, Japan, and the United Kingdom are at 54, 51, 52, and 54, respectively.
The views expressed represent the Manager's assessment of the market environment as of March 18, 2015, and should not be considered a recommendation to buy, hold, or sell any security, and should not be relied on as research or investment advice. Views are subject to change without notice and may not reflect the Manager's views.
International investments entail risks not ordinarily associated with U.S. investments including fluctuation in currency values, differences in accounting principles, or economic or political instability in other nations. Investing in emerging markets can be riskier than investing in established foreign markets due to increased volatility and lower trading volume.
The consumer price index is a common indicator of inflation. It measures changes in the price level of a market basket of consumer goods and services purchased by households.
Investing involves risk, including the possible loss of principal.
Past performance does not guarantee future results.