Just like there's an assumption that Fed Chairman Ben Bernanke will do what it takes to keep the U.S. economy afloat, at least one fund manger thinks similar central bank stewardship will dampen the impact of projected slumps in China and Europe too. You might call it the big easing, but by any name, the fact remains that different economic outcomes from different parts of the world, are currently garnering the same solution: Rate cuts.
In the case of China, their latest GDP reading approached a three-year low of 8.9% - albeit above expectations - and now the drumbeat of further cuts to the country's reserve rate requirement are cropping up again. And in Europe, where fears of runaway inflation are palpable, fresh data show prices are far more stable than predicted, which should allow the ECB to resume its path of cheaper money after pausing for a spell.
"QE (quantitative easing) is definitely sailing in Europe," says Charles Smith, the CIO at Fort Pitt Capital. "I expect European economies to suffer at least two quarters of negative growth but we'll be back to a slow growth, muddle-through economy by the end of this year."
And Smith has similar above average expectations for China too, where he sees growth troughing at 6 to 7% via an "engineered soft landing" and thus, he sees continued opportunities to make money in some well-established global industrial (XLI) themes.
"It's all about worldwide air traffic, even through the depths of the financial crisis and recession, worldwide air traffic continued to grow in the mid single digits," SMith says, pointing out that existing planes aren't getting any younger and are also carrying more passengers than ever.
His top plays in aerospace include hydraulic equipment maker Parker-Hannifin (PH), increased avionics via Honeywell (HON), and aircraft-maker Boeing (BA), which he would buy on any reports of bad news concerning the delivery and after-market performance of its new 787 Dreamliner.
"I think the wind is at the back of the aerospace suppliers as the traffic grows and the plans get older and older."
He also explains how record low natural gas prices will pave the way for more turbine sales at General Electric (GE), as more utilities convert their power production from coal to gas to take advantage of cheap prices and abundant domestic supply.
Are expected rate cuts enough to lead you back into the global industrials?
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