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BlackRock - Cycles Out of Sync - 2016 Investment Outlook

BlackRock financial experts give their outlook for this year and recommend careful navigation for the year ahead.

The business cycle will be crucial for further gains in risk assets next year, now that the global tide of “easy money” that inflated valuations in recent years has crested, according to the BlackRock (NYSE: BLK) Investment Institute's 2016 Investment Outlook.


The Outlook, “Cycles Out of Sync,” details the Institute's global economic and market views for 2016, and offers insights on the likely implications for investment returns and asset allocation decisions. Overall, the BlackRock Investment Institute (BII) counsels investors to pay much more attention in 2016 to the business, credit and valuation cycles, as the impact of the monetary policy cycle fades.


With valuations no longer cheap and corporate profit margins under pressure in many markets, economic growth is needed to boost revenues. “We expect little or no price appreciation in fixed income and only muted gains for most equity markets in 2016,” the BII notes.


“Careful navigating” will be critical in 2016 because key cycles now appear to be “out of sync,” according to the BII. In particular, valuations appear to have leapt ahead of the business cycle in many markets, especially in the U.S. “We have essentially been borrowing returns from the future,” the BII says.


“The outlook is made even more challenging because long-term trends such as aging populations, high debt loads and technological change are intersecting with short-term cycles, meaning that the high growth rates of the past may not return,” said Ewen Cameron Watt, Global Chief Investment Strategist, BlackRock. “But the good news is that we see a modest pick-up in global growth and a renewed investor focus on fundamentals.”


Source: BlackRock as at 9 December 2015.

Jean Boivin, Nigel Bolton, Russ Koesterich, Bob Miller, Ewen Cameron Watt and Helen Zhu, for BlackRock, December 2015

Please note that these are the views of Jean Boivin, Nigel Bolton, Russ Koesterich, Bob Miller, Ewen Cameron Watt and Helen Zhu, for BlackRock and should not be interpreted as the views of RL360°.

Author

Jean Boivin, Nigel Bolton, Russ Koesterich, Bob Miller, Ewen Cameron Watt and Helen Zhu

BlackRock Investment Institute
December 2015

Please note that these are the views of the authors for BlackRock and should not be interpreted as the views of RL360°.

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