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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.

30/09/2015

Ugo Montrucchio

Ugo Montrucchio

Multi-Asset Fund Manager

Schroders

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.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. 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 Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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