Outlook 2018: Turning up the heat
span style="font-size: small;">Standard Chartered Bank’s Wealth Management Advisory Outlook 2018 predicts a continued gradual pivot to a more reflationary outcome, combining modestly stronger economic growth with rising inflation.
Steve Brice, Chief Investment Strategist at Standard Chartered Bank said that Growth accelerated in 2017, but inflation did not and Standard Chartered believes a gradual ‘heating up’ of the global economy is likely in 2018, with robust economic growth and inflation finally increasing. The Outlook 2018 report is designed to help our clients navigate these market conditions.
span style="font-family: Calibri; font-size: small;">Takeaways from Outlook 2018 include:
span style="font-size: small;">Economic growth continues to simmer:
The “Goldilocks” environment (i.e. not too hot, not too cold) of strong growth and limited inflation is likely to extend into the early part of 2018. Continued earnings growth means equities and corporate bonds have room to extend gains going into 2018span style="font-family: Times New Roman;">
strong>Turning up the heat on inflation:
Inflation is the main risk to this “Goldilocks” scenario, especially further into 2018. A larger-than-expected rise in inflation would mean the environment could turn too hot, forcing central banks to tighten policy more aggressively than markets currently expect
“We suggest investors continue to tilt towards equities, which generally do well in the late stage of the economic cycle, as we do not believe valuations are a constraint to a strong performance in 2018. To contain potential downside risks, we advise investors to progressively increase allocations to diversified alternative strategies, likely to be less volatile than traditional asset classes,” said Gautam Duggal, Regional Head of Wealth Management for Africa, the Middle East and Europe - Head of Wealth Management for the UAE, Standard Chartered Bank.
The Bank is of the view that the US dollar will weaken modestly, supporting its preference for bonds in Emerging Markets – especially USD sovereign and Asia corporate bonds.