He said the United States will start to increase its interest rate while China – having an enormous amount of debt – may result in a slowdown.
“The US has had extraordinarily low interest rates for 4-5 years now. Companies not just in the US but across the world had become used to those low rates.
He told a Business summit recently that the US ten-year bond was the benchmark of which most corporate debt was priced. “The global interest rates structure is going be rising and it’s going to be rising for several years so we’re going to be looking at 5-10 year drift higher in the global cost of capital – that’s the big change.”
However, he said global economy was recovering because the US economy was preparing to raise interest rates for the first time since the global financial crisis.
Maguire said there is an assessment that the US economy is able to withstand that.
Meanwhile, he said China had an enormous amount of debt, which the country was trying to deleverage.
“At the moment you see a policy option of trying to support growth while trying to reduce debt in the economy. The risk is when China slows further, the forecast of growth is expected to be between 7-7.5%.
“So those economies which are more exposed to the services side (of the global economy), are less facing a risk if we do see any slowdown coming from the rising US rates structure or China’s slowdown.”
which becomes more recurrent than many people are expecting,” Maguire added.