Quarterly Investment Strategy
Political populism has reared its head. The election of Donald Trump to the US presidency, the UK’s decision to leave the European Union and the Italian rejection of political reform has made 2016 a year to remember. Fortunately, political change has not stopped bonds and equities from having a reasonable year, with international stocks further helped by the fall in sterling.
Global growth seems to be increasing as we move into 2017. Labour markets around the world continue to improve, boosting demand for goods and services. A more optimistic outlook, together with inflationary pressures in certain regions, is hurting fixed income but providing a tailwind to equity markets. Currencies remain volatile and further strengthening in the US dollar could cause problems for emerging markets.
2017 looks like it may be the year we finally become less dependent on central banks. Instead, we may see support from government spending, particularly in the US and Japan. We’ll be focusing on European politics and Chinese debt levels which continue to cast a shadow.