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Sturm: Emerging markets and resources lead recovery

Fred Sturm, Mackenzie Financial Chief Investment Strategist, says data from the Organization for Economic Co-operation and Development suggests that the world economy is recovering, with 75% of countries surveyed reporting an improvement in their leading economic indicators – the strongest reading in two and a half years.

Sturm, who also manages a number of funds, including Mackenzie Growth Fund and Mackenzie Universal World Resource Class, believes the coming spurt of global economic growth could “be sooner and be surprisingly bigger than expected.” And while the markets will consolidate after the recent strong gains, he expects they will continue to improve as the recession dissipates and corporate earnings improve.

Sturm also says emerging markets, with China leading the way, are the biggest “thematic opportunity for investors,” who so far have only repurchased 20% of what they sold in emerging markets during the downturn. “Yes, these markets carry more volatility,” explains Sturm. “But we see it as a good bet that strong consumer stocks in the emerging world can grow faster than strong consumer stocks in developed countries over the next ten years.

As the world economy continues to improve, Sturm believes resources will perform well. He says many of the same factors that pushed energy and base metal prices to record highs in 2008 are still in place, including population growth, rising prosperity in developing countries and declining energy supplies. “Resources remain basic to any functioning economy,” says Sturm. “Demand will continue to grow cycle to cycle.”

When investing in the months ahead Sturm suggests:

Deal with volatility by dollar-cost-averaging into the market.
For fixed income, consider corporate bonds, including the newly launched Mackenzie Sentinel North American Corporate Bond Class.
Maintain a solid base in funds featuring strong franchise stocks.
Invest in emerging markets, resources, healthcare and information technology.
Take advantage of short-term weakness (there will be dips) to buy.

What history says about bull and bear markets

History shows a long-term upward trend in stock markets that is very unpredictable over the short term. As the chart below illustrates, however, bull markets can last far longer than bear markets.

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