NOMURA: It's The End Of The End Of The World

[thenews]

Japanese investment bank Nomura is out with a big global economic outlook for 2014. The title is "The End Of The End Of The World." The theme is that as 2013 comes to a close, the age of crisis is well and truly over. There are still lingering issues of course, but the really huge themes that have dominated the past several years are gone, and concerns over systemic risk will no longer be high on investors minds.

Strategist Michael Kurtz and Co. write:

There wasn’t any memo, but FYI the Global Financial Crisis is over. Not that clocks have simply rewound to 2006, but: the US property market has been recovering for no less than 20 months, the US household balance sheet is largely repaired, the renminbi is stronger and the US-China current account imbalance vastly reduced, China is grasping the nettle of structural reform, European core-vs-periphery cost differentials have substantially narrowed, and Europe is growing again.

Looking forward, we thus see 2014 as a year in which macrosystemic risks will not dominate equity performance – unfinished QE ‘taper’ business notwithstanding – but equally as a result, a year in which returns will not be spirited along by ‘risk compression’ and multiple expansion either. Rather, global stocks in 2014 will stand or fall in large part simply on whether they deliver earnings. The good news is, 2014 should serve up a reasonably robust growth platform for global corporate earnings: Our economists expect global nominal GDP growth to rise to 7.0% next year from 2013’s 6.1% -- leaving our strategy preferences inclined toward cyclical- and reflation-sensitive sectors. But the acceleration will be unevenly skewed toward the Developed Market economies, while Emerging Market growth plateaus and China’s growth further moderates (to 6.9% in real terms).

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