A Look Into the Future With SocGen
Sometimes, the world feels like a James Bond movie. We’ve got international intrigue (see: the drama around Greece and European bailouts), backroom politics (see: super PACs and the primary debates) and even the threat of global war (see: U.S. tensions with Iran).
The economy is way more volatile than it used to be, even on average; in fact, some economists speculate that volatility may be the new norm.
So, we’d really love someone to tell us, “What does the future hold?” That may sound like a pie-in-the-sky request, but Société Générale, a very large European bank, has granted it. SocGen, as it’s called, has released its Global Economic Outlook report with its predictions for the global economy, and Business Insider has provided a useful, user-friendly summary.
Here are the highlights of SocGen’s predictions for different economies around the globe:
- United States: Although the U.S. economy has been on the rise lately (the Dow hit 13,000 just this Tuesday), SocGen doesn’t expect the momentum to continue. Turmoil in Europe remains a risk for us—if Greece defaults, the contagion could spread—and the current growth in GDP may not be enough to keep our economic engine chugging.
- China: Growth is expected to decelerate this year, with the country’s biggest risk being the tightening of its housing sector.
- Britain: The bank doesn’t predict much growth for the other side of the pond through the middle of the year, but then, they say, the country can expect an uptick due to the Olympics.
- Germany: SocGen predicts a sharp slowdown because of the European crisis in other countries.
- France: Expected to grow only 0.5% this year, France’s big hurdles will be its presidential election (because that will greatly influence the 2013 and post-election national budget), the European debt crisis’s impact on credit and rising oil prices.
- Italy: The recession, according to SocGen, will get way deeper, and worse than expected, with cuts to worker wages and households unable to pay their debts. The biggest issue, Business Insider reports, will be “long-term and sustained debt reduction, while improving GDP growth.”
- Spain: The report predicts a double dip recession for Spain, in which the economy recovers briefly and heads back into a recession. Here’s more on what a double dip recession means.
- Sweden and Norway: Both countries will experience moderate growth, though they’ll be pressured by the rest of Europe. Both have room for policy actions if conditions worsen.
- Czech Republic: This Eastern European country could be at the edge of recession because of weakened consumption and the European debt crisis (the Czech economy relies heavily on exports).
- Japan: The Japanese economy will grow in 2012, by as much as 2.4%.
- Russia: The economy will probably slow down, but the government will step in to help, SocGen predicts. Consumer demand is expected to continue growing toward the beginning of this year, slowing down later in 2012.
For the full coverage, check out Business Insider.
What This Means for You as an Investor
First and foremost, the events of 2012 don’t actually have a lot of bearing on our investing portfolios, or at least they shouldn’t. Because the stock market is naturally volatile, you shouldn’t be putting your money into it unless you know for sure you won’t need it back within the next five years or more. And then, if you needed your money back within ten years, you’d probably choose “safer” investments than if you had decades before withdrawing your retirement investments.
Stock investments aren’t generally considered as “safe” as investments like bonds, because there’s a greater degree of risk. Of course, there’s also a greater potential upside. So, if you have money you’ll need back within the next decade or less, you probably shouldn’t have a ton of it invested in stocks, anyway.
The whole beauty of investing is that time has the ability to mediate risk. So if you plan to retire and withdraw your money 40 years from now, the world will be a very different place, and these hiccups along the way will be just that—speed bumps in our collective memory. As the mantra goes, we should aim to buy when prices are low, so we can sell later on when they’re higher. If anything, setbacks now mean that there’s more room to grow in the future.