Investors are facing unprecedented challenges in today's global markets. Finding answers can be hard. We have identified a few key investment themes and matched our investment solutions around each, helping you to meet your investment challenges.
Toward normalization – the uneven path to growth
Risk assets had a strong start in 2018 until an equity sell-off in early February ended a long period of abnormally low volatility. We see the overall environment as still positive for equities. The gradual journey towards monetary policy normalization continues to be underpinned by broad-based growth across the global economy. In 2017, the demand recoveries in both the Eurozone and in emerging markets gathered pace, while the US economy also strengthened despite rising interest rates. China’s transition from over-leveraged manufacturing hub to a more diversified economy also has progressed more smoothly than many had expected. The breadth of the demand drivers—by geography and by sector—reduces the likelihood of a sharp reversal.
Opportunities in emerging markets
Are emerging markets vulnerable to US and developed world central bank policy, or are they backed by sufficiently powerful secular forces to suggest that the benign environment of the past two years may only be the start of a longer-term positive trend, under- pinned by a positive broad-based and improving global economic upswing?
Low yields have presented a significant challenge to investors for a number of years. With nominal 10-year US Treasury yields not far from 3%, the US economic cycle is clearly more mature than other developed nations, even if yields are well below the average of past recovery peaks. While the positive broad-based global upswing likely to continue, we expect yields to slowly grind higher in Europe (and to lesser extent in Japan) for the foreseeable future.
Sustainable and impact investing
Sustainable investing is about broadening the use of material, non-financial data in the investment analysis process to include ESG—or environmental, social and governance—metrics. Incorporating these metrics helps investors take a broader view of the potential upside and downside of their investments and so make better informed investment decisions.