MLC cautiously optimistic on shares and world economy

Despite the global economic outlook for 2011 looking uncertain, the best investment opportunities remain in equities, according to MLC Implemented Consulting’s latest quarterly update.

MLC Implemented Consulting predicted that overall economic growth in the developed world would be reasonable, if unspectacular. While share prices have risen recently, so too have corporate earnings, meaning the outlook for the global economy remained generally supportive for share markets, according to the statement.

While MLC did not predict a renewed recession or double-dip in the US, or in the world economy more generally following improved recent economic data, the outlook for those on the European periphery such as Greece and Ireland remains dire.

“Over the medium-term, equities seem to offer the best return prospects for investors, particularly because traditional safe haven assets such as Government bonds appear to offer poor future returns, especially in overseas markets,” the update stated.

There is a risk of policy error threatening the world recovery, and policymakers will be required to exercise difficult judgements over the coming years to sustain growth and prevent a slide into deflation, as seen in Japan, according to MLC.

Policymakers will also need to guard against an excessive rise in asset price or generalised inflation further down the track, and rein in excessive budget deficits over the medium to longer-term as the positive impact of past fiscal stimulus measures continues to fade, MLC stated.