Watch/Listen

Schroders 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.

30/09/2015

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.

Important information: The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  Exchange rate changes may cause the value of any overseas investments to rise or fall. Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell. The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors. Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.