2018 mid-year Investment Outlook
I hope you enjoy reading our 2018 mid-year outlook. In the pages that follow we share our perspective on what has clearly been a difficult market environment year to date.
In truth, part of the reason it has felt tough this year is that it has been so different from last year’s unsustainable Goldilocks combination of synchronised and accelerating global growth with low inflation and, hence, a very subdued trajectory for interest rates. In fact, it’s not really so bad this year, it’s just nowhere near as good as it was in 2017.
Growth has clearly slowed in Europe and Japan, and inflation pressures have begun to build in the US, prompting a rise in bond yields, but the corporate sector is in good shape, globally, and there is no prospect of recession. Moreover, despite some cyclical inflation pressure, both inflation and interest rates are set to remain very low by the standards of the last fifty years.
What does this mean for our investment strategy? As always, whatever the environment, our focus very much remains on market and security valuation. In essence, we continue to be constructive on global equities, favouring Europe, Japan and emerging markets, as well as emerging-market local debt, in preference to bonds in the developed world.
In this edition of our outlook, our Global Chief Strategist and our asset-class CIOs explain how our analysis of the environment and our valuation-based approach have led us to these conclusions.