Return to growth depends on stimulus packages: AMP

AMP Capital Investors says the return to global growth is sustainable, but at a lower level than has been the case in the last decade.

The key risk was how the economic stimulus packages put in place at the height of the financial crisis were unwound over the next few years.

"If they tighten too quickly too soon, that could derail the global economic recovery," head of investment strategy Jason Wong said.

The New Zealand economy would rebound on the coat tails of its major trading partners, with growth of about 3.5 per cent. That view was supported by business confidence surveys and improved retail spending.

"Returns are definitely going to be lower, the equity market is not performing as well, but we still think we are going to get reasonable returns from diversified funds," Mr Wong said. "The sweet spot for equities is over. The time to invest in equities is when everyone is depressed and the economy is not performing."

But the early stages of the recovery would support equity markets through strong company earnings growth.

"Overall we think equities offer much better prospects than cash and bonds which were hard to get excited about in a low-interest-rate environment."

The strong New Zealand dollar also ate away at returns from overseas shares which gained nearly 38 per cent hedged, but only about 9 per cent unhedged.