Commentary & Insight

Capital Markets Outlook — Second Quarter 2008

Quarterly investment perspective from the Capital Markets Committee.

Stock markets retreat, bonds strong in first quarter

Global economic outlook
Slower growth, but no recession for U.S. economy

Although the pace of U.S. economic growth noticeably decelerated in the fourth quarter of 2007, it is not clear that it has shifted into reverse. Despite subpar growth in the first quarter of 2008 and widespread downgrades in the forecasts of many economists, the economics unit of Ameriprise Financial does not believe that the U.S. economy has headed into recession. In fact, we expect economic expansion to accelerate over the remainder of 2008.

Global investment strategy: equities
Most stock markets lose ground

Decelerating economic growth around the world, coupled with a slow unwinding of the liquidity squeeze, continued to weigh on global stock markets in the first quarter. Write-downs in the financial sector continued and tighter loan standards in most developed markets kept a lid on growth, as concerns about consumer spending in developed economies drove investors to low-risk investments. U.S. Federal Reserve action to initiate a lending facility for 20 primary dealers, and also to provide additional liquidity to the investment banking industry, has seemed to create somewhat of a floor thus far in the domestic equity markets.

In this issue:

• Slowdown, not recession
• Stocks slump, then stabilize
• Global inflation pushes higher
• Flight to safety in the bond market
• Policy response to the credit crisis

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