Market and Economic: Global Investment Forum
Over three days a selection of our investment managers, economists and strategists congregated in London for our annual Global Investment Forum (the Forum).
As well as sharing their own analysis and insights, the team heard from a range of independent experts with sessions covering geographic regions and topical themes like artificial intelligence, Big Data and tensions around international trade.
The Forum is designed to foster an environment of debate – one in which our team can formulate views and perspectives on economic and market prospects which, in turn, can be applied within the portfolios we manage on behalf of our clients. It is designed to tune out the day-to-day market noise and focus on key market drivers over the medium term.
The global economic upswing has been long but shallow and inflationary pressures remain subdued. This creates a fertile environment for risk assets.
But while we expect equities to perform reasonably well with corporate earnings continuing to grow, even against the headwind of rising interest rates, we fear that government bonds and corporate credit may be vulnerable as the unprecedented central bank stimulus is wound down.
|Chart 2: Number of OECD Countries with Low Core Inflation|
|Chart 3: OECD Policy Rate Changes|
While our overall economic view remains upbeat, we concede that there are clouds on the horizon. The U.S. Federal Reserve (Fed) is currently raising interest rates, as are other central banks. We are also witnessing an escalating trade war between the U.S. and China, which is straining relations between the world’s two most powerful nations. Elsewhere on the geopolitical stage, we look on with unease as Brexit and a surge of nationalism threaten the established order in Europe.
A feature of the next five years is likely to be the end of the recent ‘synchronized growth’ phase of the global economy and a return to more uncorrelated growth rates. This can be expected to translate into more differentiated performance by asset markets, which will in turn bring more opportunity for informed investors to make attractive returns.
Interesting times lie ahead as the global economy seeks to establish a new equilibrium both in the context of normalized monetary policy and global trading relationships.