The global expansion is chugging along, with an improved Eurozone outlook in particular; deflation fears look to have faded; financial market volatility is subdued. We believe this provides fertile ground for modest gains in risk assets such as equities. We are focusing on three key themes.
1.Sustained expansion — We see the world in a synchronized and sustained economic expansion that is slower than previous cycles.
2.Rethinking returns— We believe structurally lower growth and interest rates mean that comparing valuation metrics to past levels may not be a good guide to the future.
3.Rethinking risk — We see low volatility as a normal feature of the benign economic and financial backdrop – and not as a warning sign in itself. Taken together, this could mean equities are cheaper than they look – and investors may run the risk of being under-risked.
In addition to these three key themes, a further look will be taken at our current asset class and regional views.