The global economy is headed for a 'bumpy ride' in the second half of the year with Asia to be hardest hit as markets adjust after three years of solid growth, predicts Henderson Global Investors' chief strategist Tony Dolphin.
The London-based director of economics and strategy shared his gloomy outlook with Hong Kong investors as part of an Asian tour, citing rising interest rates, inflation and a stretched economy as signs of turbulent weather.
'After three years of good growth ... we are coming to the end of the economic cycle.
'What we are looking at are excesses in global markets or major economic corrections, lots of inflation, low levels of unemployment, high-wage pressures and massively overvalued property. The low level of US savings and the high deficit that has been around for a number of years and rising interest rates will cause markets to weaken in the second half of the year.'
Mr Dolphin said with interest rates and inflation both going the wrong way 'it will be a difficult time for shares'.
The unstable climate is expected to continue in the early months of next year before a new economic cycle and recovery at the end of 2007. He added that comments from Federal Reserve chairman Ben Bernanke had sent jitters through global investors and he hoped the Fed would consider hiring a spin doctor.
However Mr Dolphin gave some cause for optimism, predicting cashed-up private equity funds would swoop on discounted stocks and takeovers would lead to the streamlining of companies.
