Leading institutional money managers expect the U.S. economy to remain healthy in 1996, but they expect the second half of the year to be stronger than the first half.
They also expect interest rates to continue to inch down in the first half, and for inflation to remain low.
Stock market returns in the United States are expected to be far below those of 1995 but still positive, and non-U.S. markets are expected to provide significantly better returns.
These are the consensus views of five top investment professionals gathered for Pensions & Investments' annual investment outlook roundtable, held Nov. 30 in Los Angeles.
The participants were:
Stefan Abrams, chief investment officer for asset allocation, TCW Group, Los Angeles.
Robert D. Arnott, president, First Quadrant Corp., Pasadena, Calif.
Sarah H. Ketterer, portfolio manager, Hotchkis & Wiley Inc., Los Angeles.
Lawrence S. Speidell, partner and director, global systematic management and research, Nicholas-Applegate Capital Management, San Diego.
Christian Wignall, chief investment officer-equities, GT Capital Management, San Francisco.
PENSIONS & INVESTMENTS: Christian, what are your expectations for the U.S. economy in 1996? Will it be accelerating? Slowing? Or continuing on an even keel?
CHRISTIAN WIGNALL: I think the U.S. economy is still slowing, and it will continue to slow in the first half of 1996. I would expect that during the first half of 1996 we will have several cuts in interest rates by the Fed and a reacceleration in the second half of the year.
So whereas the U.S. economy in 1995 was strong in the first half and weak in the second half, I think we will have the flip situation in 1996. It probably all comes out about the same number.
P&I: What would that be?
MR. WIGNALL: 2.5% to 3%.
P&I: Sarah, what are your expectations for the year's economy?
SARAH KETTERER: We expect the economy to remain healthy.