Economic outlook: As mid-year and the summer slow season approach, William De Vijlder, chief investment officer at BNP Paribas Investment Partners, spoke with Delano.lu about what he expects to see in the markets during the second half of the year.
AG: Are you seeing a shift in the mood of the economy?
WDV: Up until number of months ago, the environment was pretty clear: inflation was not an issue, monetary policy was very easy.
Gradually that picture has evolved. Some central banks have tightened [monetary policies], inflation and government debt are front page news, and markets are far more choppy. That in itself is a big challenge for investors.
AG: What is your outlook for the coming months?
WDV: Our feeling is, as we go into the fall of this year, confidence in the economy will improve.
AG: Will we see any improvement before then?
WDV: This summer, we don’t expect anything except a sideways market with a good degree of volatility.
AG: Won’t the looming sovereign debt crisis have a more negative impact?
WDV: I suspect in a few weeks time it will be less the front page crisis than it is now. When Greece receives a commitment for a new tranche [from the European Central Bank and International Monetary Fund]--depending on its parliamentary vote on budget cuts--then structural reforms will become the burning issue. That would mean euro zone crisis moves to the second or third page of the newspaper.
AG: But you see things perking up in the autumn?
WDV: Coming back from the holiday season, as we go into fall, we see the market being more supportive, due to our expectation that [government economic] data will improve a bit.
AG: What about here in Luxembourg?
WDV: Luxembourg for obvious reasons is always looking to its largest neighbour. Despite the appearance of a slowdown in Germany, German growth the past quarters has been pretty solid and been very balanced. People have been under the impression that German growth is all driven by Chinese buying German cars. That’s not really only the case. It’s been driven by net exports, private consumption, corporate capital investment and construction. Inventories in Germany have been going down as well. So a harmonious picture is underpinning its growth, and it should continue.