World Economy Can Weather No Trade Deal, $443 Billion Fund Says

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Global economies are robust and deep enough to withstand the impact of a potential fallout in the U.S.-China trade negotiations, according to Principal Global Investors LLC.

“Even if they don’t agree to a trade deal, the economic backdrop whether it is consumer, business, I think growth in domestic economies will dampen the effect of no trade deal,” Pat Halter, chief executive officer of the Iowa-based asset manager that oversees $442.5 billion, said in an interview in Tokyo. “I think there is enough strength in the broad economic system. If that is the case, I think you would possibly start to see some risk-on again in the second half.”

Fears of a prolonged U.S.-China trade war have cast a pall over the outlook for the global economy and financial markets. With U.S. President Donald Trump’s administration working up plans to target almost all of Chinese imports and moving to curb Huawei Technologies Co.’s access to the U.S. market and American suppliers, it doesn’t look like the world’s two biggest economies are heading for a truce anytime soon.

Even so, investors are taking a “half risk-off” approach and continuing to show demand for strategies such as high-yield products, preferred securities, bank loans and private debt, Halter said.

The second half of this year may see investors taking a risk approach, just as they did in the first quarter, if they feel that the trade deal is not going to cause much of a destruction in economic activity, he said.

To contact the reporters on this story: Chikafumi Hodo in Tokyo at chodo@bloomberg.net;Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net

To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Shikhar Balwani

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