Our Global Investment Strategy service recently published their Q3 Strategy Outlook, which discusses the major investment themes and views we see playing out for the rest of the year.
Key take aways from this quarterly report include:
- Global Macro Outlook: The Brexit vote was a wake-up call for policymakers across the developed world; reflate growth/wages, and reduce/reverse the surging income inequality that gave rise to this populist anti-globalization revolt or be voted out of office. This report chronicles how a global savings glut and now dearth of capital investment have been so deflationary as to drive interest rates to record lows.
- Credit-Sensitive Fixed Income: Maintain a neutral overall spread duration position for now. Corporate spreads may perform well as sentiment improves post-Brexit, but U.S. corporate balance sheet erosion will limit excess returns; European corporates, by contrast, will continue to benefit from the ubiquitous search for yield and ECB support.
- Equities: Incrementally reflationary policy in response to political uncertainty and populist pressure will boost global growth relative to expectations, which, admittedly, may remain subdued through the summer until the European growth fallout from Brexit becomes clearer.
- Currencies: The dollar bull market remains intact; the U.S. labor market has tightened sufficiently to expect some wage pressure to materialize, which, in conjunction with looser fiscal policy, will boost growth enough above trend to warrant moderate rate hikes that markets do not yet discount.
- Commodities: The cure for low commodity prices will ultimately be low commodity prices, but the prospective growth in Chinese demand for base metals is unlikely to absorb the glut of excess capacity too quickly.
To access the full report entitled “Strategy Outlook Third Quarter 2016”, please click here.