A surprise growth surge in the United States economy has not signalled the worst is over for Australian equities and their global peers, according to investment experts.
“It will provide us with some stability, however it is not the mystic bell that tells us the worst is over,” Lincoln Indicators chief executive and analyst Elio D’Amato said.
“Ultimately it reaffirms our belief that the US is in for a softer landing than a lot of people may be expecting.
“That could quite easily change if one of the big [US] banks went under, or if the US housing sector kept sinking for another two years.”
Gross domestic product (GDP) climbed 3.3 per cent from the second quarter of 2007 to the same time this year, a US Commerce Department report statement said. That beat median economist estimates of 2.7 per cent as surveyed by Bloomberg and Reuters.
However, most of the increase was driven by exports and masks the fact 463,000 Americans have lost their jobs since the country’s sub-prime mortgage market imploded, which has cost banks over $510 billion in losses worldwide.
“To me, the technical definition [of recession] is not very important. It is the case of – if it looks like a duck and quacks like a duck. So I think we are in a recession,” Schroders group chief investment officer Alan Brown said, referring to the US.
D’Amato said it was likely Australian and US equities, particularly financials, would stabilise as long as a big bank did not collapse.
He added the Australian economy will continue to be shielded from Asia’s robust commodities demand.
