|All the CIO interviews|
What were the surprises of 2014?
The main surprise, a negative one, was the weakness of the eurozone economic activity which delivered a growth of less than 1% versus the 1.6% to 1.7% expected by most economists.
For sure, the Ukraine-Russian conflict over Crimea, with the consequent sanctions imposition to Russia, resulted in a damage to German exports as well as the rebalancing of the Chinese economy from investments to consumptions. But these two factors can explain only partially another year lost for growth in the eurozone.
The reality appears to be that three years of austerity, coupled with the absence of a powerful monetary stimulus and a very slow process of reforms implementation in France and Italy, seem to be the root of the euro economic problems.
The second surprise was the sharp decline of the oil price, which has created even more problems for already troubled countries such as Russia and Venezuela.
What regions are you expecting to see the most growth this year?
We continue to be positive on the US, which should finally deliver a 3% economic growth in 2015. The recent decline in the price of oil and gasoline should add an important amount of disposable income into the US consumer wallet, therefore providing another boost to consumptions that can already rely on an improving trend in jobs creation.
China will carry on her long-term rebalancing process avoiding a hard landing and delivering an economic growth between 6.7% and 7%. The eurozone should manage to grow at around 1%, thanks to a more accommodative monetary policy, a weaker euro and a less restrictive fiscal policy.
What is your view on fixed income for 2015?
After the unexpected extraordinary positive performance of fixed income in 2014, we do not expect much more than a 'coupon clipping' result out of the fixed-income universe. We still expect some spread compression in eurozone peripheral bonds and there are still good carry trades to take advantage of in a selective number of emerging government bonds.
Which asset classes do you expect to outperform?
As bond yields of developed countries offer very little value, we continue to prefer to invest in equities versus bonds, which, in 2015, should not have difficulty in delivering a return higher than bonds.
Even in the eurozone, all factors seem to provide a strong support to equities, which, on average, offer a dividend yield higher than government bonds.
The same reasoning can be applied to Japan, which will continue to reap the benefit of an impressive quantitative easing and to China, which will count on a more supportive monetary policy.
What are the biggest unknowns/risks for 2015?
The biggest risk is in the eurozone. In fact, if the European Central Bank fails to deliver the necessary monetary stimulus and if the European Commission does not allow for more fiscal flexibility, the anti-euro parties of Spain, Greece and Italy could gain more voters support to the point of creating a main obstacle to the much-needed reform and integration process.