Royal Bank of Canada speaker addresses financial risks at Construct Canada

Hermann Leiningen, Managing Director, Royal Bank of Canada Global Asset Management and Alex Carrick, Chief Economist, Reed Construction Data Canada, spoke at the CEO Power Breakfast at Construct Canada at the Metro Toronto Convention Centre. Canada,

The world’s focus has been caught up in the fiscal crisis and it will continue to stay that way for the next few years, said Hermann Leiningen, Managing Director, Royal Bank of Canada Global Asset Management.

He said it’s very easy to get caught up in the noise of the marketplace, but it can be very dangerous.

“It’s not the first time we’re managing in very difficult times, it’s not the first time we don’t have all the answers,” he told a crowd at the recent CEO Power Breakfast at Construct Canada in Toronto.

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“But we can assess the risks and we can try to manage around the risks.”

As the fiscal crisis continues to be a key theme for the next few years, it will lead to slower growth, especially in the developed world, he said.

Leverage to emerging economies will be important as the developing world continues to grow.

“The world has two places now; there’s the emerging economies and the sinking economies,” said Leiningen.

He said it’s interesting that the world still wants to invest. He pointed to China that is looking at real estate, private equity and global resources such as copper, nickel, zinc, gold, oil and uranium.

“That was very encouraging because at a time when everyone thinks the world is not going to grow anymore, here’s the engine of the world deciding it’s still going to grow,” he said, adding that’s great for Canada since 50 per cent of the stock market is resources.

Leiningen said commodity prices will likely stay higher for longer because of resource nationalism.

Alex Carrick, Chief Economist, RCD Canada, pointed to construction as the emerging market that will determine where Canada goes, even though the country is still very much tied to the U.S. economy. Carrick also spoke at the breakfast.

“We’re not just an appendage to the U.S. anymore,” he said.

“We are becoming a significant enough player on the world stage that we have to think strategically<0x2026>between 2004 and 2014, the dollar value of construct value is going to go from $150 million to $300 million.”

The construction sector for the next little while will face uncertainty because of the economic outlooks, but with projects like the Pan American Games and resources throughout the country, it will be better off than many, said Carrick.

Recession concerns will still surface, added Leiningen.

“There are going to be times when we get close to zero, people are going to talk about a recession and it could happen,” he explained.

“We don’t think they’re going to be deep, in fact, we’re not looking at a double dip.”

A lack of confidence continues to add volatility, and some volatility is important, said Leiningen.

Stocks continue to look attractive over the long term. He said stocks usually anticipate what’s going to happen.

“Rates are low, that’s good for stocks. Inflation is low, that’s good for stocks. And earnings, in fact, are starting to grow, which is also good for stocks,” said Leiningen.

“But the market doesn’t want to pay anything for that because there’s more worry about the global macro pictures.”

There was a big initiative to get rates to zero, which was essentially a way to get people borrowing again and making it easy for money to go into the system.

“[The Federal Reserve] is suggesting that rates will stay lower and for longer, which is good news in terms of keeping stimulation in the marketplace.”