Volatility is Not a Sign of Recession

Fears of a slowdown and China and recession in Europe – big contributors to angst about global growth – have abated. But volatility does make equities look more attractive

Coutts 27 October, 2014 | 3:30PM
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Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, Alan Higgins, UK CIO at Coutts, gives his outlook for the economy and stock market.

Last week – in the face of a sell-off in equities and mounting volatility – we expressed our continuing optimism in global economic recovery. Since then, economic data has largely justified our sanguine view.

Fears of a slowdown and China and recession in Europe – big contributors to angst about global growth – have abated. Although annual growth in China’s gross domestic product (GDP) slowed to 7.3% in the third quarter, this was better than the 7.2% pace expected. HSBC’s initial “flash” estimate of China’s purchasing manager’s index (PMI) of manufacturing activity also rose more than expected to 50.4 - above 50 signals expansion. This is evidence that the government’s recent stimulus measures are working.

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