The US$4.5 trillion in global stimulus packages are yet to have their full impact on economies worldwide and this will drive the growth of international equities over the next two years, according to Fidelity International.
Since the announcement of the packages in March this year only a small amount has made it through the bureaucratic rigmarole, Fidelity International product director for global equities Chris Sugg told InvestorDaily.
"My guess is that of these stimulus plans, maybe a quarter has actually found its way through the planning stage, through the US federal government providing the funds, to actually companies hiring people, buying materials and starting the projects," Sugg said.
"Those plans will be ongoing and impacting the market for some two years to come," he said. "Quarter four this year will see an acceleration of how that impacts the economy."
The pending growth will create opportunities for investors, Sugg said, and he sees the best opportunities in technology, healthcare, materials and financial stocks, especially within emerging markets.
Yet, despite these global stimulus packages being the largest incentives to have ever been initiated, Sugg had his reservations about the final dollar amount to be committed.
"If the domestic economies start to rebound strongly, my guess is that governments will take the foot off the pedal," he said.
Central banks should also be careful not to raise interest rates too early again as this could cause a new downturn, Sugg said.
"The US Federal Reserve, European Central Bank and Bank of England made some mistakes over the last few years in terms of management of the financial situation, the banking system and the financial system," he said.
"What they will not want to do is risk a double-dip recession and deflation. They will rather see inflation come back into the system."
