Investment Perspectives, January 2018

2017 was a good year for the global economy and an outstanding one for equity markets
The global economy enjoyed its strongest rate of growth since 2011 with the most noteworthy aspect being that growth was broad-based and expectations were upgraded during the year. Geopolitical tensions, at times quite threatening, failed to dampen high levels of business and consumer confidence and had only a short-lived impact on capital markets. Concerns about European political events did not materialize as populist parties failed to create an upset in several general elections. Also, Emmanuel Macron’s spectacular rise to power in France was considered to be a major boost for the future stability of the European Union.
Equity markets had an unusually smooth ride throughout 2017 with strong and widespread corporate profitability and ample liquidity underpinning higher equity prices; volatility was consistently close to record lows and no major shocks were observed. Bond markets could be described as having been a little choppier but remained within relatively tight ranges. Surprisingly, the euro turned out to be the strongest major currency, on the back of a much more stable political landscape than expected in Europe.

Equity markets were the drivers of portfolio performance
The main reason for our good performance was our decision to hold an overweight equity allocation throughout 2017. Even though fixed income exposures also contributed positively to last year’s returns, equities significantly outperformed, with above-average performances recorded across all regional areas. In contrast to 2016, alternative investments performed in a more satisfactory manner. Finally, an underweight dollar exposure for non-USD portfolios limited the negative impact of its depreciation.

CONTENTS

  • EXECUTIVE SUMMARY
  • 2017: REVIEW OF OUR INVESTMENT THEMES
  • 2017: ECONOMIC & POLITICAL DEVELOPMENTS
  • 2017: THE FINANCIAL MARKETS
  • 2018: ECONOMIC OUTLOOK
  • 2018: FINANCIAL MARKETS’ OUTLOOK
  • 2018: ASSET ALLOCATION

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Tags: Investment outlook