2012 is just around the corner and based on the Mayan calendar, the end of the world is approaching. Given what happened this year, there will be more than one who would believe that such prediction has got chances of not being really a prophecy.
This said, in the American continent, the hope of a prompt recovery has become more real than ever, especially during this last semester. For this reason, we would like to join the American wave of enthusiasm and expect more promising predictions for the year to come.
We believe that 2012 will not bring full recovery to the American economy but rather be characterized by an acceleration of the growth of the former. The path is not easy, however if the unemployment rate keeps dropping at the pace it fell with during the last months, we will undoubtedly see a quick recovery; one that will give its fruit soon. The engine of the positive tendency has been the increase of corporate investments and more jobs especially those created by the private sector.
It is important to clarify the lack of consensus we have seen within the "Super Committee" in relation to deficit reduction could mean limited risk in growth. This would result in the use of mandatory spending cuts, the implementation of job tax hikes or the decrease of unemployment aids. All these factors could have a negative impact on the growth of the economy as the rate of consumer spending would certainly be diminish.
Regarding the interest rates, the Fed has already confirmed that no significant changes will take place until mid 2013, maintaining them near zero. Additionally they are prepared to take further actions to make sure that the economy grows in a faster pace during next year. The idea is to put a plan in place so that the American economy´s expected growth rate would settle in a range between 2.5 and 2.9% during next year.
Additionally, basing our predictions on the corporate results, Blue Chip companies are going to keep acting as safe haven for many investors looking for chances in the equity markets. Some of them are currently trading at historical maximum levels, are increasing their dividend yields and are showing very solid business models that guarantee a stable growth next year.
Lastly, it is important to highlight two facts: firstly, the American economy is currently experiencing significant exposure to the euro crisis, which is undoubtedly slowing its growth. In regards to this subject, many experts have expressed during the last weeks their views on what they call "decoupling" between the American economy and the European one.
This means that the two economies could possibly have very low inter-correlation one with another. The resulting implication is that in the case that the European economy goes into a recession, the American one would be able to keep progressing without being too affected by the trouble of the old continent. Secondly, the presidential elections could have meaningful effects on the fiscal policy of the country depending on what candidate is elected. Even though we expect this to have a greater impact on the 2013 markets, it is a factor that needs to be kept in mind for 2012 as well.
Overall, in 2012 the American economy should go back to the path of stable growth, looking to reach the pre-crisis levels as far as the stock markets are concerned. We have no doubt, that this will be the wish of many investors in the coming year, hoping to see how the Dow Jones index gets close to escalate back to the 14,000 level.
Luisa Martinez, Head of Research and Analysis at Miramar Capital Asesores EAFI
