Look ahead: Macro trends to shape 2016
With New Year just around the corner, we wish you a prosperous year ahead!
Do you have confidence in the investment market in the coming year? We believe it’s important to keep an eye on global market trends, so that you can stay calm during market fluctuations and capture the investment opportunities out there. Let’s check out what industry experts say about the market outlook for 2016.
The following article is provided by PineBridge Investments:
Despite the respite of the rebound in global stock markets in the past months, investors may now face their biggest macro worry: the risk of a global recession. Weaker emerging market growth is dragging global economic growth to its slowest pace since the financial crisis. There are still opportunities, however, for selective long-term investors.
Broad recession really coming?
In the summer of 2014, the International Monetary Fund (IMF) predicted global growth would be 4% in 2015 – this has now fallen to slightly more than 3% (Source: IMF World Economic Outlook, International Monetary Fund, October 2015). While the IMF revised its US growth forecast a tad higher, it reduced those forecasts for Japan, and for commodity exporters such as Canada and Australia.
Surprisingly, its projections for Chinese growth did not change, but the IMF now expects deeper recessions in Brazil and Russia this year. Despite all this, we believe the global economy will avoid a broad recession, posting growth of 3% for 2015 and 3.4% for 2016.
Market volatility continues
From our perspective, if US interest rates rise further and faster than market expectations, it will have a negative impact on the fixed income markets – but this is a very low risk scenario in our view. Further commodity price volatility such as the price of oil or metal dropping to new lows, will impact more commodity-linked issuers and countries such as Malaysia and Indonesia.
We think that the excessive focus on the recovery especially in the US, China and the Eurozone will remain the key focus for investors and may see market volatility continue. We see these bouts of volatility as an opportunity for different asset classes such as equities. This presents an opportunity to invest in companies which have robust business but at lower prices. These companies typically are better placed than the rest during economic periods of uncertainty.
Opportunities abound for emerging markets
Emerging market sentiment remains fragile. Among those, China growth, Brazil developments and Fed Reserve actions remain key. The overall picture is not uniform though, with some market segments, such as selected financials, real estate and exporters, continuing to fare rather well with the latter also benefitting from weaker currencies.
For China, we believe the mix of GDP contributors is more relevant than simply targeting 7% annual growth. Manufacturing is less critical as the service sector becomes a greater part of the economy.
India is interesting as it is expected to outpace China on a GDP growth perspective. The government is looking to improve infrastructure and benefits from lower commodity prices. In both countries, their central banks have resources to be accommodative.
We believe that the macro environment will keep a global recession at bay, but the markets will remain volatile. Selective economies in Asia will continue to offer opportunities in 2016.
About PineBridge Investments:
PineBridge Investments is a global asset manager with experience in emerging and developed markets, and investment capabilities in multi-asset, equities, fixed income and alternatives.
- The article above is provided for general information purposes only. It does not constitute a recommendation to pursue any investment strategy or take any other action.
- All investments involve risk. Past performance is not indicative of future results. In making an investment decision, prospective investors must rely on their own examination of the merits and risks involved.