Slow Growth, Not No Growth

03/11/2014 9:15 am EST

Focus: GLOBAL

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

In the Age of Technology, practically every company needs to think globally, says global investment expert, Jim Lowell, who is looking at growth in Europe, the US, and Japan.

TERRY:  I’m Terry Savage from MoneyShow.com with Jim Lowell, editor of the Fidelity Investor and numerous other newsletters including the Forbes ETF Investment Advisor.  While I have this chance, you have a global perspective and is the whole world going to move together in 2014, or are there areas you’d rather be, and I keep in mind the emerging markets lately have sort of tanked.

JIM:  I think that’s a great question, Terry.  The reality is that virtually any company is almost by its nature going to be global these days, especially with the technology, the healthcare sectors, but are there market places that we’re definitely overweight for 2014 and likely to remain so?  Certainly.  The U.S., we’re in a mid-stage economic cycle, good prospects for moderately better, earnings growth compared to last year.  Not gang busters, but I suspect we end the year with an 8% to 12% gain in the broader market averages.  Europe I think has finally begun to turn the corner.  They moved from contraction to expansion in their economy mid-year last year, 0.1% GDP doesn’t really give me a lot of confidence, but I think we’re going to see slow growth, not no growth, in the established markets in Europe and Japan.

TERRY:  Okay let me stop you in Europe.  What about the issues with Germany maybe not being able to continue supporting the expansion of the currency.  What about the Euro?  Is that an issue still?

JIM:  I don’t worry about the Euro any more than I worry about the dollar, which is to say not at all.  There is a lot of vociferous opinions about both and China’s impact on potentially selling treasuries to impact their own.  The reality is that hasn’t affected my investment discipline thinking nor philosophy for 20 years.

TERRY:  Alright let’s keep going around the world.  China, you mentioned China.  What about China?  Recession maybe there?  Banking problems maybe there?  Messing up the world because of China?

JIM:  No, but interestingly the world markets are always likely to over-react to any negative data coming out of China, which I think will be buying opportunity in the U.S. and established Europe, and I think we’ll see many instances in 2014 where China surprises to the downside, triggers a kneejerk selling reaction, but China’s problems are increasingly and rapidly becoming its own.  It has over three trillion dollars of what we would call muni-bonds to all of its principalities that have been building these cities in one, two, three years’ time.  That debt’s going to come due.

TERRY:  When they have problems that won’t impact the global financial markets or is it fine?

JIM:  I think they delink, I really do.

TERRY:  Alright.  Japan, they’re promising to print enough money to make their stock market boom and destroy their currency.  Will that work?

JIM:  As long as they can continue to promise rather than make good on those promises, I think that gives that marketplace enough stimulus and assumptions of stimulus to track higher.

TERRY:  Or emerging markets?

JIM:  We’re out of emerging markets currently after years of making reasonable gains, sometimes spectacular good gains, not just on the equity side, but emerging market debt side.  I think their light cycle economies; they may skip recession and be able to benefit from an emerging Europe in terms of its slow growth, but not right now.

TERRY:  Give everybody listening your top three places in order in the world to have your portfolio weighted.

JIM:  Europe would be one, U.S. clearly another, Japan.  In that mix I think it’s going to be mission critical to have a good active manager, not an ETF in that space.  It’s going to be stock picker’s market in 2014.  A fund to go overseas with would be something like Fidelity International Growth, Jed Weiss, great track record, good stock picker. 

TERRY:  Alright.  Thanks very much.  We are talking with Jim Lowell of the Fidelity Advisory.  You can find out more at fidelityadvisor.com.  I’m Terry Savage from MoneyShow.com.

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