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BlackRock - 2017 Global Investment Outlook

Senior investors at the BlackRock Investment institute assemble to debate the outlook for the coming twelve months. Here are the key themes they believe are poised to shape markets in 2017, as well as timely actions to consider to position portfolios for success.

Setting the stage

Global growth looks to be at an inflection point. Expect U.S.-led reflation − rising nominal growth, wages and inflation – to accelerate, and fiscal expansion to gradually replace monetary policy as an economic growth and market driver around the world. The impact of technological change, the risk of a China credit bubble and the dynamics of investor risk appetite are to be considered too.


Key views:

Reflation implications: We see reflation taking root and believe global bond yields have bottomed. As a result, we prefer equities over fixed income and credit over government bonds. We see higher yields and steeper curves, and favor short- over long-duration bonds and value shares over bond-like equities.


Low returns ahead: Structural factors such as aging societies and weak productivity growth have led to a drop in economic growth potential. We see these factors limiting how high real yields can go and see rewards for taking risk in equities, emerging market (EM) assets and alternatives in private markets.


Dispersion: We see the gap between equity winners and losers widening. A more unstable relationship between bonds and equities signals a regime change that challenges traditional diversification..


Risks: Political and policy risks abound. There is uncertainty about U.S. President-elect Donald Trump’s agenda, its implementation and the timing. French and German elections will test Europe's cohesion amid a forest fire of populism around the world. China’s capital outflows and falling yuan are worries.


Markets: We see developed market equities moving higher in 2017 and prefer dividend growers, financials and health care. We like Japanese and EM equities but see potential trade tensions as a risk. In fixed income, we favor high-quality credit and inflation-linked securities over nominal bonds.



Disclaimer: This material is prepared by BlackRock and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of December 2016 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain ‘forward-looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. This material is intended for information purposes only and does not constitute investment advice or an offer or solicitation to purchase or sell in any securities, BlackRock funds or any investment strategy nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction.


For full disclaimer see attached PDF.


Source: BlackRock as at 13 December 2016.


Richard Turnill, Jean Boivin, Isabelle Mateos y Lago, Kate Moore and Jeff Rosenberg for BlackRock, December 2016

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

Author

Richard Turnill, Jean Boivin, Isabelle Mateos y Lago, Kate Moore and Jeff Rosenberg

BlackRock Investment Institute
December 2016

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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