SG Hambros chief investment officer said the Franco-British bank was bullish on a US recovery and pointed to a decoupling of the US economic outlook from other developed economies.
Eric Verleyen told PBI in an interview before the Federal Reserve announcement that the bank was ‘sceptical’ about the Euro zone and believed that the US recovery was ‘real’ and that tapering was nothing to be ‘nervous’ about.
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On the Eurozone Verleyen however was critical of progress in fixing structural issues.
"They are getting a little bit less strict than they were supposed to be, everywhere. So they are starting to spend," he said "It’s less strict, so we think there are some issues coming back."
He said not only were there still issues with deficits in Eurozone countries but also believes another problem comes from exports to emerging markets.
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By GlobalDataHe said that as SG Hambros was in step with other banks with a view that emerging markets were going through a difficult time and Europe should not rely on this market.
"If you look at Germany for example, in the German economy 40% of GDP is exports. Half of those exports are to emerging markets. If you expect the emerging markets to go through difficulties it may also have an impact on Europe, so the export side is not good. The deficit side, the fact that they are overspending, is not good either," he continued.
Safer investment was in the US which continued to show real growth, Verleyen said.
He said that the introduction of tapering, which he had predicted to come before the end of September would have no lasting effect on growth.
"Tapering is normal, it has to happen, it had to happen. But some people are that nervous that they think that quantitative easing had to last, but no," he said "stopping quantitative easing clearly means that there are good things happening in the economy and that the economy by itself is self sufficient and doesn’t need the injection from the Fed."
SG instead thinks that US GDP growth will be 50 basis points stronger than current market consensus.
No tapering off of US growth
The 3.1% growth rate that SG Hambros forecasts for the US economy does present some longer term inflation problems, according to Verleyen.
He expected therefore a need for the Fed to raise interest rates from their current low of 0.25% to 5% starting in 2015.
However such sharp rises do not present problems to home owners in the way they might in the UK, where he also believed rates will begin to rise in 2015.
"Will it have a big impact on real estate? We don’t think so, because we are coming from a very low level of interest rates and it’s just a normalisation," he said.
SG Hambros also said that the UK was showing signs of recovery, but that the Bank of England was unlikely to ‘stop pumping’ in the short term.
SG to grow its business
With increased confidence in the global economy Verleyen said, SG Hambros itself could grow, with hiring across the bank. "If we grow, if SG grows there won’t be such an economy of scale that one guy can manage everything." Verleyen said.
The business he said would need more people in the analysis, advisory and asset management roles.
"It’s a great environment. We are not talking about cost cutting, we are talking about growing our business. " Verleyen continued, and said that management were fully behind plans for hiring in the coming year.
