Crosswinds Send World’s Economies on Diverging Paths | American Funds

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2016 Outlook

GROWTH AMID VOLATILITY  |  Emerging Markets  |  January 2016
Crosswinds Send World’s Economies on Diverging Paths

Can U.S. Expansion Pack Enough Punch to Offset Headwinds From China and EM?

“From a macroeconomic standpoint, this is not a very exciting world.Then you go to the industry level and the company level and there are a lot of things to be excited about. But you have to dig deep to understand which drug companies will get their therapies approved, which components will be needed in the next generation of technology and which companies are in the markets where the next wave of growth will come.”

Robert Lovelace
Robert W. Lovelace Portfolio Manager Los Angeles office 31 years of experience (as of 12/31/16)

Some Areas of the Global Economy Are Strengthening, but Overall Growth Remains Muted

Source: IMF World Economic Outlook, January 2016.

Any prospect for a unified and robust global recovery appears to be indefinitely on hold.

China’s growth has slowed as it grapples with the transition from an investment-led to a consumer-driven economy. Fears that a protracted slowdown could derail the broader global recovery have sparked market volatility. Growth has likewise slowed in a number of emerging markets, in part due to weak global demand and depressed commodity prices.

Despite these headwinds, many developed economies remain on a path of growth. While recovery is somewhat tentative in Europe and Japan, both are showing signs of modest improvement as central bank policy remains highly supportive. The U.S. remains the brightest spot in the global economy, in large part due to a healthy American consumer. Many wonder if the U.S. economic engine can pull the rest of the world onto a firmer growth path.

Regardless of shifting economic conditions, pockets of investment opportunity are certain to arise in 2016. Look for companies that can pivot toward growth opportunities across the macroeconomic landscape.

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