A $1.2 trillion money manager has a wake-up call for anyone who’s bullish


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Northern Trust Wealth Management recently downgraded its forecasts for the US economy.
The investor doesn’t expect a recession but says the benefits of tax reform will likely be front-end loaded and may benefit capital markets more than economic growth.
“We downgraded our growth forecast for the US, developed ex-US, and emerging markets because we think expectations have perhaps gotten a little bit ahead of reality,” Katie Nixon, the chief investment officer at Northern Trust Wealth Management, told Business Insider.

The Trump bump for the US economy may soon flatten.

Like many other investors, Northern Trust — which has $1.2 trillion in assets under management — had taken the view that tax cuts and other policies would inject more fuel into the US economy.

But at a meeting last week the firm downgraded its views, saying that a year from now the economy may not live up to the lofty expectations. In that sense, it’s a wake-up call for investors with rosier outlooks than theirs.

Business Insider recently spoke with Katie Nixon, the chief investment officer at Northern Trust Wealth Management, about why the unit changed its views on the economy and how it’s positioned to benefit from this forecast.

Interview condensed and edited for clarity.

Akin Oyedele: You recently downgraded your US outlook. Why?

Katie Nixon: For several years, we had been thinking the US economy would surprise to the upside. Last year the market went up so much but we weren’t too surprised because it was doing a little bit of catch-up to a scenario that we had seen unfolding, which was good growth propelled by tax reform.

When we met last week, though, we thought, “What is this going to look like a year from now as we look back?” And right now, there’s probably room for a little bit of disappointment relative to expectations. So we downgraded our growth forecast for the US, developed ex-US, and emerging markets because we think expectations have perhaps gotten a little bit ahead of reality.

Clearly, here in the US, we’re very late in the economic cycle. We do have the Trump tax-reform tailwind, but that dissipates over time, and we’re seeing some offsets in the form of a stronger dollar and higher oil prices.

And clearly we’re seeing some disappointments across Europe, including some of the data we got on Monday and Tuesday, which suggest that Europe is not firing on all cylinders yet.

We do have the Trump tax-reform tailwind, but that dissipates over time, and we’re seeing some offsets in the form of a stronger dollar and higher oil prices.

We see, in China, a managed slowdown, a deliberate emphasis on the quality of growth over quantity, which should be welcome to investors, but, from a macro perspective, certainly represents a slowdown. That will impact not only emerging Asia but probably Europe.

We took our growth forecasts down for all those reasons.

Similarly, we don’t think inflation is going to be an issue across any of these regions. We’ve had a durable theme of “stuck-flation” for a couple of …read more

Source:: Businessinsider – Finance

      

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