A team of University of Iowa MBA students who manage a UI stock portfolio sees lackluster economic growth over the next two years.
Unemployment will remain above 7 percent, according to the team of student analysts, who cited continuing political uncertainty in Europe and the United States as a primary cause. They forecast a national unemployment rate of 8.1 percent in February 2013, declining to an average 7.5 percent over the ensuing 18 months.
The team consists of 13 students in the UI Tippie School of Management‘s Finance Academy. They are charged with managing the UI’s $2.7 million Henry Fund stock portfolio.
Real gross domestic product growth is expected to rise at a 2.03 percent pace through February 2013, increasing to a 3.1 percent pace in the 18 months to follow.
Budgetary turmoil in the euro zone economies is likely to keep interest rates artificially low due to a “flight to quality” in U.S. Treasury securities, the student analysts indicated.
The team was less concerned about the fiscal cliff looming at the end of this year. Congress will approve a temporary extension of the nation’s debt ceiling until a more permanent solution can be hashed out after Inauguration Day, the students believe.
As for investment options, the UI team believes stocks are underpriced in industries poorly positioned for growth in the sluggish economic climate. Many companies are holding onto large reserves of cash that they are unlikely to invest until after the political climate has become more clear, the group reported.
On a more positive note, the team expects inflation to remain in check, with a rate of 1.9 percent by February 2013 and 2.8 percent in the 18 months to follow.