Pointing to a stagnant housing market, lagging employment and the need for a weaker dollar, Micheal Kearns, regional director, Americas, of global asset management company Permal says that problems facing the US and world economy now may last for many years to come.

Speaking at a luncheon organized by the Chartered Financial Analysts Society of The Bahamas held at the Sheraton in Nassau last week, Kearns suggested that the massive quantitative easing witnessed since 2008 has done little to restore banking confidence.

“Despite the fact that there is all this liquidity in the system, banks are still not taking risks, so it is still hard to get loans,” he said. “The resultant prolonged dip in consumption, coupled with stagnant housing prices, where we are not seeing a dramatic ‘v’ shape recovery, will have a lasting impact on the rest of the economy.”

Kearns said that, historically, there has been a ripple effect throughout the economy as the housing market picks up, new house are built and people need a range of services and products. However, this is not the case, as “it will take years to work off the existing housing inventory.”

Other factors that will continue to dampen recovery include the lack of new job creation, rising oil prices, and a strong dollar. “Despite what some people say, we need a weak dollar to boost exports.”

The fund manager went on to suggest that it was unlikely that there would be any dramatic move by the Federal Reserve to hike interest rates, as it would be mainly concerned with its two key mandates of full employment and price reliability.

Speaking on the investment strategy of Permal’s fund managers, Kearns added: “A diversified portfolio, with low volatility is the mandate.”

The CFA Society of The Bahamas is a non profit society that’s chief goal is to encourage and to assist individuals in the investment management industry. The society serves as advocate in the financial community by liaising with the Bahamas Securities Commission and providing input for regulation of the industry.

The society was formed in 1990.

Permal is a stand-alone business within Legg Mason Wealth Management.