World growth will continue to flatline this year and next, as global trade remains weak and cheaper oil crimps the energy sector more than it has stoked consumer spending.
That was the view of Schroders chief economist Keith Wade, speaking at the recent Schroders International Media Conference.
Schroders had earlier predicted that the world economy would grow by 2.9 per cent next year, but is now trimming its forecast.
"It's looking a bit more like 2.5 per cent now. If that is the case, then it will be the fifth year running that we've had 2.5 per cent growth in the world economy," Mr Wade told reporters at the fund house's London headquarters.
One of this year's biggest disappointments was none other than the American consumer, who Mr Wade had expected would help to boost trade by spending what he saved from cheaper oil.
But the United States is now a significant energy producer, said Mr Wade. "It doesn't benefit in the same way that it used to when oil prices fell. Although the shale gas economy is much smaller than the US consumer, because they've cut back (capital expenditure) so aggressively, that's actually outweighed a lot of the gains they've had on the consumption side."
And what US consumers save on petrol, they tend to spend on restaurants and groceries - which is good for the domestic economy but has little pass-through to trade partners, noted Mr Wade.
He said: "Global trade is not quite in a recession but it's in one of those weak periods, well below average, well below what you see when world recovery has come round."
Global prices could also fall further, thanks to a stronger greenback and weaker emerging markets, he said. "When people talk about a China hard landing, they focus a lot on the impact on global gross domestic product. The thing to remember about China is that it doesn't tend to restructure its industries. When it can't sell stuff, it tends to dump it onto international markets, and the United Kingdom steel industry has experienced that first-hand."
Schroders emerging markets economist Craig Botham pointed to signs of a turnaround in China, going by an increase in land sales on the mainland, though he noted that this was less an indicator of property strength than it is of the strength of government stimulus.
"Local governments are putting pressure on developers to buy land now if they want to have access to land banks in the future," he said, noting that Beijing often relies on local governments to intervene to help the economy and land sales are their main source of revenue.
On Asian equities, Mr Richard Sennitt, fund manager for the Schroder Asian Income Fund, said valuations in general are looking "pretty cheap", though defensive stocks have become more expensive.
"People are very much focused on earnings stability. They're worried about the outlook for global growth and they're quite happy to pay up for earnings certainty," he said.
Among defensive plays, Mr Sennitt is underweight on consumer staples, utilities and healthcare. But he is overweight on telcos, citing "reasonable" valuations and expected cash-flow growth in some of them.
Mr Sennitt also likes some materials and consumer discretionary stocks, and has added South Korean and domestic Chinese names to his fund, though he owns no Chinese A shares - listed on the mainland - and has been consistently underweight on H shares - listed in Hong Kong - for the past few years.