In an update, Principal Global Investors indicated that the mild cyclical upturn is a result of numerous factors, including positive employment and manufacturing data out of the US, and more stability in China.
“Validation of the upturn includes stellar US job reports and a clear rebound in manufacturing data, along with the return of consumer confidence and solid housing activity leading to rising home prices which add to wealth,” the report said.
“Stability in China and a pick-up in Europe also signal that the way is up.
“China looks to be smoothing out, with consumer confidence returning, worries about currency devaluation dissipating and other signs that, while there may not be a growth rebound, there is a cessation of a two-year deterioration,” the report stated.
However, while there is evidence of an upturn, Principal Global Investors warned investors not to expect an “easy upward ride”.
“Japan remains seemingly immune to the positive trends occurring elsewhere, with a fourth quarter of economic shrinkage on the back of weak production and retail sales – despite stimulus efforts of the Bank of Japan.
“The US Federal Reserve is still cautious despite the generally more positive outlook. While Fed Chair Janet Yellen virtually ruled out policy reversals or negative interest rates, she overtly acknowledged the clear impact of global events on the United States – and pundits are expecting a rate hike,” the report stated.
The report also noted that if the upturn is “real”, cyclical assets should outperform.
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