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Press, Journal Article
39
NEWS RELEASE
T. ROWE PRICE MIDYEAR 2016 MARKET OUTLOOK: MODEST
REVENUE AND EARNINGS GROWTH EXPECTED GLOBALLY; U.S.
RECESSION UNLIKELY THIS YEAR
Improving global growth could provide investors with attractive investment opportunities
Baltimore: June 14, 2016
NEWS
The first half of 2016 has been volatile, with the global economy facing several challenges that unsettled
financial markets around the world. Abrupt swings in sentiment created a difficult environment for buy-
and-hold investors, and markets were tested by slow global growth, the potential for rising inflation and
interest rates in the U.S., and lingering concerns about China.
Despite these concerns, T. Rowe Price experts expect to see modest revenue and earnings growth. The
fears plaguing the first half of the year are being slowly alleviated; stabilizing markets, a pause in the
Fed’s gradual monetary tightening, and easing fears of the financial volatility of China could turn a difficult
start into a more promising finish. In this environment, security selection will be key, both in stock and
bond markets.
MIDYEAR MARKET AND ECONOMIC OBSERVATIONS
•
Signs of financial and economic stabilization in both developed and emerging markets appear to
have set the stage for an improved global equity climate in the second half of 2016. However, this
view depends heavily on stability in energy prices, the U.S. economy, and the Chinese financial
system.
•
Emerging market stocks outperformed developed markets in the first half of 2016. This has been
a result of corporate earnings showing signs of improvement, and a short-term revival in
commodities, oil, and currencies. In many cases, countries have improved their fiscal and current
account deficits, debt positions, and inflation levels, leaving them in a better position to absorb
economic shocks.
•
Among the most important risk factors for emerging markets is the continued improvement of
corporate earnings. Current valuations reflect pessimistic estimates for earnings growth and any
positive surprises are likely to bring relief to markets. Companies will need to deliver over the
medium- and long-term, however, to allay fears and bring about a re-rating of individual stocks
and markets.
•
Economic environments globally are struggling against two primary headwinds as they enter the
second half of 2016: the need for emerging market economies (EMs) to deleverage and the end
of the commodity “super-cycle.” These winds are gusting forcefully over China and Brazil. Given
that EMs represent 40% of global economic output, the impact is also being felt in developed
economies.
•
The Brazilian and Chinese markets have been challenging for investors. Brazil’s economic and
political travails have created an uncertain environment, but there is the potential for improvement
with a transfer of political power and a renewed focus on long-overdue micro- and macro-