Global equity performance in 2017 is likely to hinge on prospects for an earnings recovery from the currency- and commodity-related downturn of the past two years. Foundations for an improved earnings environment appear to be in place. Read more...
Earnings prospects are improving in developed and emerging equity markets, although recent political events could create uncertainty.
Expectations for somewhat faster global growth could continue to drive a rotation from defensive to cyclical and financial stocks.
Investors appear to believe that the Trump administration will pursue aggressive fiscal stimulus policies. However, details are unclear.
A gradual rise in U.S. interest rates should not threaten global equity markets.
Emerging equities appear strong enough to withstand moderate U.S. dollar appreciation.
Across emerging markets, positive drivers are building. We believe there are very interesting pockets of growth that are hard to find in the slower-growing developed markets. Read more...
Economic growth relative to developed markets is now stabilizing. China is the one exception, but a growth slowdown should not be confused with a growth crisis.
This improved economic growth should provide a healthier environment for corporate earnings, particularly if margins begin to improve, as we expect.
The potential for higher U.S. interest rates is resurrecting some of the concerns for emerging markets. However, most countries are in much better shape to weather what should be modest increases in interest rates orchestrated by the Fed.
The prospects for growth remain strong, although in the near term investors may see short-term market volatility as top-down concerns, including uncertainty about economic policies in the U.S. under a Trump administration, circulate. Importantly, given robust fundamentals and areas of superior growth, we believe there are still many rewards to be found.
With U.S. yields likely to rise, U.S. floating rate loans and high yield bonds offer good value. Read more...
Donald Trump’s election as U.S. president has raised the prospect of tax cuts, increased spending, and higher growth and inflation in the U.S.
This could lead to higher yields in the U.S., while yields in most of the rest of the world look set to remain low.
Emerging markets may be hit hardest by higher yields in the U.S., while Europe faces a year of uncertainty as a series of elections test the extent of growing anti-establishment sentiment.
U.S. floating rate loans and high yield bonds look set to offer the best value in the current environment, but it should pay to adopt a prudent approach overall, focusing on selective, high-conviction positions.