JP Morgan strategists pick 2012 bright spots

Economic growth will struggle to rise above 0.5% in the eurozone next year, according to JP Morgan Asset Management’s global strategists, although the picture is more cheerful in other parts of the world.

Tom Elliott
Tom Elliott

Tom Elliott and Dan Morris point out that the eurozone debt crisis, which has blighted the markets and the region’s growth over 2011, will “almost certainly continue to reverberate in 2012”.

The economists add that the damage to the eurozone economy has already been done and warn that growth will remain low over the next 12 months even if a concrete resolution to the crisis is achieved.

“Growth will be fortunate to reach 0.5% and the reforms required to boost economic competitiveness will take years to bear fruit,” according to the economists.

Furthermore, the picture in the UK is little better in the commentators’ opinion, as the country has to undertake similar adjustments and cannot rely on exports to offset its weak domestic demand.

However, Elliott and Morris claim “the outlook is a bit brighter” away from Europe.

The US is likely to benefit from continued monetary and fiscal expansion in the months running up to the 2012 presidential election. In addition, the Treasury market remains popular with investors despite recent warnings about the size of the country’s indebtedness.

Asia’s economic growth is widely expected to outstrip that being seen in the West, even if slowing demand from Europe hurts the region’s exports. In Japan, recovery from the March 11 earthquake and tsunami will progress over the year, the strategists add.

Elliott and Morris also predict Latin America’s commodity exports will remain strong thanks to ongoing demand from China, while Brazil and Mexico are expected to see domestic demand strengthen over the next 12 months.

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