Investment Outlook

Spring 2017

Leading economic indicators are at their best levels in several years, economic surprises have been overwhelmingly positive and corporate earnings continue to recover from their prior stumbles. Taken together, global economic signals remain quite strong by post-crisis standards. As a result, risk assets such as equities and corporate credit have performed well.


Economy

  • Leading economic indicators are at their best levels in several years, economic surprises have been overwhelmingly positive and corporate earnings continue to recover from their prior stumbles. Economic growth has improved in both developed and emerging markets, with most countries managing some improvement in recent months.
  • Risks to our outlook include the aging business and credit cycles, rising populist movements, higher interest rates, elevated Chinese debt loads and an ever-evolving and uncertain political landscape in the U.S. and Europe.
  • We expect that the global economy will be able to manage these risks and continue to grow and possibly even accelerate, though still running at a pace below long-term historical norms.

Fixed Income

  • Globally, many central banks are still focused on delivering prior quantitative-easing commitments. The one exception is the U.S. Federal Reserve which continues to press forward with its plan to nudge the fed funds rate higher.
  • Yields have risen rapidly since last summer which has greatly reduced the valuation risk and, therefore, the need for a further near-term adjustment.
  • However, our fixed-income models continue to suggest that the long-term direction for yields is higher. The combination of both a bit more inflation and a higher real rate of interest would act as a headwind to fixed-income returns in general and pose a risk to sovereign-bond investors, in particular.

Equity Markets

  • Prospective returns for equities are much more attractive relative to bonds and we have maintained our long-standing overweight.
  • We don’t think that valuations are as stretched as some investors believe, but we do recognize that stocks are not as cheap as they were, so a continued improvement in earnings is needed to fuel further equity gains.
  • We have slightly reduced our exposure to stocks due to the uncertainty surrounding U.S. public policy and a variety of style and technical factors.



Global Investment Outlook

Our quarterly publication that provides a detailed global investment forecast, including updates on economic and capital markets.


Learn More >

Current Perspectives

Gain valuable insight on current market events.

Learn More