04 Jan 2018
Can equities continue to rise from their current heights? Investors ask us this question more than any other and our answer remains yes. Valuations are high relative to history but the macro environment is remarkably benign for financial markets and valuations should be judged in that context.
We think equity markets will be carried to new highs by a supportive macro environment in 2018. Headwinds are present though. The US economy is at risk of overheating, tighter financial conditions could slow the European recovery and Chinese growth stimulus seems likely to moderate following the 2017 Party Congress. Geopolitical risks related to North Korea or US trade relations could flare up at any time.
How can investors weather the heights in asset valuations and the potential risks in 2018? We think this environment calls for a dynamic approach to asset allocation, an equity strategy that looks beyond the major developed market benchmarks and a fixed income approach that seeks returns outside of developed market government and corporate bonds.
Read and watch our answers to six questions on our website: 2018 Annual Outlook