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Investment Weather Forecast: emerging markets face perfect storm

Multi-Asset view: while the outlook for global equities overall remains broadly positive the forecast for emerging markets and fixed income is not so bright as the region faces up to the perfect storm.

30 September 2015

Ugo Montrucchio

Ugo Montrucchio

Multi-Asset Fund Manager

Support remains for global equities

The medium-term outlook for global equities remains quite bright.

Valuations at the moment are fair, but we think that modest growth elsewhere in the world, and accommodative monetary conditions, should provide some support for earnings in the medium-term.

Emerging markets could struggle

The outlook on emerging markets is, however, much darker both for equities and fixed income. Emerging markets at the moment are going through a perfect storm. They are facing:

  • A stronger dollar
  • Deteriorating corporate balance sheets
  • Much lower pricing power among their exporters, given the weakening demand coming from the developed world

Interest rates cloud fixed income outlook

The outlook for the fixed income market is in general overcast.

We think that some level of volatility will feed through the system as we approach the first interest rate hike in the US.

Equally we think that very benign monetary policy almost everywhere else in the world should be supportive for government bonds in the medium-term.

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