Global investment risk high in 2004, says Calif.-based consulting firm.

January 8 2004--"Economic growth in the U.S. during 2004 will probably be slower than in 2003," says Jeph Gundzik, president of Condor Advisers, an eight-year-old investment consulting company based in Mammoth Lakes, Calif.

Gundzik, publisher of a monthly newsletter analyzing investment risk, says the enormous current account and fiscal deficits in the U.S. will push market interest rates much higher and the value of the dollar much lower. This will reduce personal consumption expenditure and encourage the flight of foreign capital from the U.S.

Strong growth of U.S. personal consumption expenditure in the past three years, has been driven by rapidly rising household debt, which reached an estimated 112 percent of personal disposable income in 2003. Falling interest rates, house price inflation and mortgage refinancing encouraged the growth of household debt. Declining interest rates also attracted enormous foreign investment in U.S. government, agency and corporate bonds. The stock of foreign investment in U.S. fixed income securities amounted to $800 billion in 2003.

"Despite the Fed remaining trigger shy, market interest rates in the U.S. will rise as the budget deficit continues to increase and the dollar depreciates. Rising interest rates and dollar depreciation will also feed foreign capital flight, further pressuring interest rates and the dollar," Gundzik says. He adds that continued rapid growth of personal consumption expenditure, which accounts for 80 percent of U.S. economic activity, will be difficult under these circumstances. "Economic growth in the U.S. will probably be only around 2.5 percent in 2004," he says.

According to Gundzik, increasing global geopolitical instability during 2004 could further undermine US and global economic growth. Deteriorating US foreign relations with many countries and increasingly violent insurgencies in the Middle East and elsewhere will also
negatively impact the value of the dollar and US interest rates. "High global investment risk will benefit precious metals, pushing the price of gold toward $500 per ounce," he says.

Condor Advisers, a Mammoth Lakes, Calif.-based consulting firm specializing in investment risk analysis, has been serving institutional investors globally since 1995. Condor's research has foreseen all the major crises in emerging markets, including the Asian liquidity crisis in 1997, Russia's default and devaluation in 1998, Brazil's devaluation in 1999 and Argentina's default and devaluation in 2001. Jeph Gundzik is available to speak to the media about global political and economic trends, and investment risk and opportunities in emerging markets.





This article courtesy of http://hwbi.net.
You may freely reprint this article on your website or in
your newsletter provided this courtesy notice and the author
name and URL remain intact.

Submit Your Article