2016 and beyond

In our outlook on 2016 and beyond, we answer the most important questions about financial markets.

In a world in transition, will the United States continue to lead the path? Is Asia's double-digit growth coming to an end? Why do we think investors should be careful while investing in commodities?

We're trying to give an answer to these and many more questions. In our portfolios section, we explain how we build portfolios and why we believe in long-term strategic asset allocation.

Paying close attention to behavioral biases is an important part of managing a well-performing portfolio. In our behavioral finance section, we explain why listening to gut-feeling doesn't always work.

Finally, in our last section on longer-term themes we highlight opportunities to invest for the future.


Regions

Global

We expect growth to pick up in 2016 after a dip in 2015. But our overall view of a world in transition trudging along at an ok but slow pace remains unaltered. We expect this to be the fourth year in the past five of precisely 3.4% growth.

US

We expect US growth to accelerate in 2016, to 2.8% from 2.5%. Consumer demand will be supported by an improving labor market, a pickup in lending growth, positive wealth effects, and rising household formation.

Europe

For the Eurozone, we expect growth to rise to 1.8% in 2016, from 1.5% in 2015. Growth in the UK should remain good, at 2.4%.

Switzerland

The Swiss economy has skirted a recession after the EURCHF shock at the beginning of 2015. The booming domestic economy is acting as a buffer, absorbing the bumps and jolts in export sectors created by the strong Swiss franc.

Asia Pacific

Overall, we expect Asia’s growth to slow slightly in 2016, for the third consecutive year, stalled mainly by China’s slowdown.

Emerging Markets

Growth in EM will remain subdued, but should improve in aggregate. We expect 4.3% growth for developing economies, relative to 4.1% in 2015.


Asset Classes

Equities

Equities

We are positive on the outlook for equities as we enter 2016. Our preferred regional markets are the Eurozone and Japan, which should benefit from rising earnings, low refinancing costs, and currencies which are weak on a trade-weighted basis.

Bonds

Bonds

We expect bonds to underperform equities in 2016.
Yields on the safest bonds remain very low, and we might (finally) be approaching a year in which the Federal Reserve increases interest rates.

Alternative Investments

Alternative Investments

2015 was a relatively difficult year for hedge funds, amid weak returns from global equity markets and a number of idiosyncratic events affecting widely-held individual stocks.

Cash

Cash

After an 8% trade-weighted appreciation in 2015, following on from its strength in 2014, the US dollar is at its strongest, on a trade-weighted basis, in more than a decade.

Real Estate

Real Estate

Real estate prices in many global cities have doubled since 1998 in real terms. On average they are now higher than before the 2007-8 financial crisis. But some housing booms stand out, with valuations decoupling from local incomes.

Commodities

Commodities

We expect overall commodity prices to stabilize in 2016, with an expected upswing of around 6% to 10%. The improvement is likely to be driven mostly by crude oil, while a continuing deceleration in China should keep base metals weak. We expect the risk-reward profile for gold to improve in 2016 as US real interest rates sink deeper into negative territory.


Portfolios

How we build portfolios to ensure they are optimal for you. Learn why tailoring is important.

Longer term themes

We believe in investing with an eye on the future. Mega trends will affect the world we live in. Identifying them helps us play a role in the world of tomorrow.


Recommended reading

Six questions for 2016

Did 2015 mark the peak of the cycle for risky assets? Where do we stand on monetary policy? We give the answers to these questions and more.

My House View

Try our interactive feature to see how your portfolio is positioned compared our UBS House View.