The Global Landscape:
Risk levels - The past several years has seen global financial managers take action to reduce their exposure to the risks of financial market contagion. While the failure of a sovereign credit will be painful it will not cause the system to collapse. The lessons of the Lehman failure are still fresh in the minds of the financial community and the appetite for risk is still subdued which is a positive element in viewing financial markets.
Europe – Germany, despite some considerable resentment within the EU, is pushing the restructuring of the EU to achieve more stringent standards of fiscal and monetary management. Germany’s own self-interest is tied to the survival of the EU as Germany has prospered within the Union and has found pricing its export products in Euros a great sales advantage. The question remains as to whether there is the political will on the part of the free spending members of the Union to change their ways.
Emerging Economies – While there is a tendency to focus on European and North American economies or the larger emerging economies of Brazil, Russia, India and China, many smaller economies are growing at excellent rates. In the Americas, Mexico, most of Central America, and many countries in South America, such as Chile and Columbia, are prospering. In the Far East, there is also good economic progress producing predictions for total Global growth close to 3% for 2012- not a bad number at all!
China - A key element in any economic forecast is Chinese growth. Many forecasters do not seem to understand that China is a managed economy. While free enterprise plays a role in the Chinese economy the big decisions are made by the government. To accommodate the millions of Chinese that must be moved from unproductive rural jobs to higher paying urban jobs requires new housing and infrastructure. Backed by a population that saves and huge foreign exchange reserves, the Chinese government will create growth.
In the US and Canada economic progress will be slowed by government cut backs. A healthy and cash laden corporate sector will continue to be cautious about hiring but aggressive about takeovers. Politics will dominate in the US in advance of the November elections.