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HSBC - To 2017 and beyond... Investment Outlook

The HSBC Global Asset Management team of Chief Investment Officers and Strategists provide their year-end review for 2016 and their outlook for 2017.



In summary:

  • The economic and market environment continues to be characterised by unusual uncertainty.These uncertainties can take many forms, of course, including risks over the outlook for the global economy, potential doubts about the effectiveness of economic policy and, more recently, political developments which have confounded market expectations, including, most obviously, the UK referendum’s majority vote to leave the EU and Donald Trump’s victory in the US Presidential Election. The populist backlash which appears to have been an important factor in both the UK and the US will be a concern in Europe next year as elections in France and Germany, in particular, take centre stage.
  • While a rise in populism may be a concern for some, its obvious political influence probably increases the likelihood of more pro-cyclical fiscal policy in the developed world. Indeed, we may be witnessing a modest regime shift which we might call ‘the end of austerity’ with, at a minimum, fiscal policy becoming more pragmatic and more in harmony with accommodative monetary policies.
  • The current low interest rate world has important implications for how risk assets should be priced. While prospective returns on equities, corporate bonds and other risk assets appear very low by historic standards, our analysis concludes that today's valuations 'work' in the sense that risk premiums, the excess returns available over the 'risk free rate' in exchange for taking equity and credit risk, are at fairly normal levels though, as ever, the devil is in the detail and we discuss our relative value preferences in this report.
  • There are many risks and uncertainties and episodic volatility will continue to feature. Robust valuation discipline will be the key to navigating these troubled waters.

December 2016

Please note that these are the views of the authors for HSBC Global Asset Management and should not be interpreted as the views of RL360°.


Author

Chris Cheetham, Jonathan Curry, Bill Maldonado, Joe Little and Xavier Baraton

Global Chief Investment Officers, HSBC Global Asset Management
December 2016

Please note that these are the views of HSBC Global Asset Management and should not be interpreted as the views of RL360°.

360° fund links

HSBC Global Asset Management funds can be accessed through our guided architecture products Oracle, Paragon and Quantum, and also through our PIMS portfolio bond.