Global Economy Encounters Headwinds, Not Hurricanes

OCEAN CITY – Spurred by government stimulus, pent-up demand and renewed investor confidence, economic recovery is spreading across the globe.

"Almost every economy is showing signs of shaking off the deep psychological shock and the wealth losses of the recession — and, with the help of policy, starting to grow again," says Ethan Harris, Head of North America Economics at BofA Merrill Lynch Global Research. More important, economic recovery is creating market opportunities.

In a wide-ranging discussion, moderated recently by Joe Zidle, Global Wealth Management Strategist, Harris joined David Bianco, Head of U.S. Equity Strategy, and Michael Hartnett, Chief Global Equity Strategist. The three analyzed the factors reinforcing recovery, as well as the remaining headwinds challenging growth. All agreed that while serious challenges remain — particularly in the U.S., with its rising unemployment and lagging consumer spending — positive forces are beginning to bolster one another.

The time has come, they say, for investors to consider a new asset-allocation strategy that moves away from the defensive sectors favored by investors during the recession and includes cyclical sectors such as energy, technology and financials.

"To be bullish on the U.S. banks certainly tells you that the worst is over," notes Michael Hartnett, Chief Global Equity Strategist, who encourages investors to begin "reducing cash levels and looking for opportunities in asset markets in the U.S and overseas."

As always, before you make any investment decisions, discuss them with your financial advisor.

(A Merrill Lynch Senior Financial Advisor. She can be reached at 410-213-8520.)