Global Investment Outlook - 2011 Part II

By M. Isi Eromosele

In 2011, it will be prudent to practice a tactical asset allocation policy that prefers stocks over bonds and cash. This is recommended because we at Oseme Finance believe that a mixture of natural global growth, conservative monetary policy and a better global political environment will encourage a certain level of risk taking in global investing. Within the context of this risk taking, there needs to be a focus on the management of downside risks while partaking in the global markets’ positive potential.

Global Central Banks

Central Banks in the United States and the European Union have played vital roles in stabilizing global finance during the recent world financial crisis as well as in its aftermath. The U.S. Federal Reserve Bank made a crucial decision to strongly mitigate the deflation risk by helping the banks raise their reserves through the advancement of billions of dollars to them.

The European Central Bank (ECB), with a singular focus on maintaining price stability, was initially more conservative in its financial bailout programs. However, as the sovereign debt crisis in the European Union escalated, it has changed its stance by advancing billions of dollars to European banks and states suffering from excessive budget deficits.

China’s central bank, the Peoples Bank of China, has achieved more success in maintaining sufficient liquidity in its huge economy. It attained this feat by effectively working with its banks to affect a rise in the money supply to help accelerate growth in its economy.

The U.S. Federal Reserve and the ECB will take no major actions to remove liquidity assistance and raise interest rates in 2011. The Federal Reserve is still very much focused on countering deflationary risks in the United States. Central banks in emerging countries are expected to be more preventive in their policies, moving forward because of apparent inflationary pressures in their economies.

China has taken the route of raising the required rate of its banks’ reserve obligations. In other emerging economies, fiscal controls that limit the inward flow of capital have been implemented. This indicates that during 2011, emerging countries will practice more restrictive fiscal policies that those in the advanced economies, with uncertain effects on global currencies.

Sector Investment Strategies

As the global economy has maintained its upward trajectory, we have amended our recommendations for investment strategies in several global sectors. Our stance is being influenced by articulated views of the global economy and financial markets as well as a micro analysis of the fundamentals present within the various global sectors. These dynamic success factors, coupled with the fast resurgence of emerging market economies lead us to believe that the global environment is conducive to astute investment opportunities.

The top line investment sectors we’ve chosen are energy, technology and industrials. As the world recovery accelerates, the demand for needed energy supplies will grow exponentially. All indications point to a positive return in investments in the energy sector. The same dynamics apply to the technology sector, with demand by corporations rising as the global economies continue to expand, engendering strong corporate profits, which in turn results in robust capital expenditures on required technology. Industrials will benefit from continued strong emerging markets growth as well as increased domestic demands on the heels of corporate reinvestments in their manufacturing plants.

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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