Markets Outlook

February 2016 Investment Outlook - the best papers

Savvy Investor

2016 began with the worst January in recent memory, many risk assets appearing to be repriced indiscriminately. What is the outlook for the rest of 2016? Here is our appraisal of some of the best analysis:

2016 Asset Allocation Outlook: Altitude Adjustment (PIMCO, Feb 2016)
Since 2008, investors have benefited from expansive monetary policy worldwide and some asset prices have reached dizzying heights. How will markets adjust from these high levels of altitude? It is difficult for markets to adjust to the end of a good run. PIMCO argue that return dispersion will be large, but they do not expect the deep declines of January to continue.

Feb 2016 Outlook (Morgan Stanley Global Investment Committee)
The Morgan Stanley team examines a variety of topics, including the factors that would indicate a looming recession. They suggest avoiding momentum stocks and to focus on quality.

Yield Curve (Monthly Bond Market Outlook from Desjardins) Feb 2016
This monthly commentary examines the outlook for global bond markets. It's written from a Canadian perspective by Desjardins.

Cross Asset Investment Strategy (Amundi, Jan/Feb 2016)
This paper by Amundi provides asset allocators with food for thought. It examines risk factors and market opportunities in 2016, the current state of the BRICS, central bank policies, and the impact of a new wave of industrial robotisation.

Markets Brace for Bear Case (Goldman Sachs, Jan 2016)
The Federal Reserve's tightening cycle caused a significant shift in the global macro backdrop at the start of 2016. Goldman examines global monetary policy expectations for the coming 12 months.

2016 Outlook - the best papers (written in January)

Global Macro Outlook for 2016 (KKR, Jan 2016)
The authors argue that we are moving into more turbulent waters; investors are no longer being paid appreciably more to move out along the risk curve while equity valuations are high. They recommend raising cash and adopting a more defensive orientation.

2016 Investment Outlook - Cycles Out of Sync (BlackRock)
Credit, business and valuation cycles appear to be out of step with each other. This strengthens the case for careful navigation over the next 12 months.

Macroeconomic Outlook 2016: Walking a Tightrope (Pioneer, Jan 2016)
The global economy is "walking a tightrope". The base case scenario is favourable, but there are realistic dangers of either deflation or stagnation, and economies could be blown off course by both structural and cyclical challenges.

Other popular and trending thought pieces for 2016

Market Macro Myths: Debts, Deficits and Delusions (James Montier, Jan 2016)
This paper by James Montier focuses on the concept of "sound finance" in the context of the role played by debts and deficits in overall economic policy. Montier challenges the belief that budget deficits are necessarily bad.

The Ten Surprises of 2016 (Byron Wien, Jan 2016)
Byron Wien's ten "surprises" of 2016 are here! Byron is something of an institution in his own right, firstly publishing his "10 surprises" in 1986, when he was Morgan Stanley's Chief Investment Strategist. As usual, these "surprises" were formed after deep reflection and discussion.

70 Is the New 65: Demographics Support 'Lower Rates for Longer' (PIMCO, Feb 2016)
Is global aging about to end the savings glut? As it becomes more and more common for baby boomers to reach retirement age, it won't be long before they're not only saving less but also dumping their accumulated assets to fund their retirement. This, if true, will have a huge impact on interest rates and The New Neutral.

China devaluation - a necessary evil? (Gavyn Davies, Jan 2016)
Following a period of confusion and indesicion, the PBOC intervened strongly in the markets to devalue the renminbi. However, capital outflows remain significant and the rebalancing of the economy is not proceeding as satisfactorily as some have suggested. A further decline in the FX rate may become a necessary evil for China, according to Gavyn Davies.

Has Profit Share Peaked? The new global competition for corporate profits (2015)
The past 30 years have seen the biggest corporations in the world benefit from market expansion, declining costs, and profit growth, but these gains may end soon. This McKinsey Global Institute report provides insights and projections.

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