Corporate fundamentals on strong footing
Investors are set to be happily surprised by the strength of company earnings which will sustain stock markets while strong economic data confirms the continued caution surrounding corporate bonds, according to analysts at Standard Life Investments. Productivity and profitability, according to Standard Life, provide the positive factors in its quarterly outlook.
"We remain optimistic on equities on several grounds," says Andrew Milligan, head of global strategy. "Profits look set to exceed expectations while market valuations are supportive. This view is based on our analysis of the factors driving strong productivity growth in the US and other economies, as well as demand especially in Asia."
Increasing consumer demand is being met by improved productivity ? rather than increases in the workforce ? which comes as a result of increased investment dating from before the most recent global downturn.
Milligan adds: "Stimulative monetary policy has been a critical ingredient in generating economic recovery. A number of central banks are taking action, or close to acting, to prevent future inflationary pressures. We do not expect central banks to be aggressive; the main aim of policy makers is still to ensure that the current phase of growth can be sustained."