CIBC Asset Management Perspectives – A TRICKY BALANCING ACT
Despite the enormous number of headlines focused on U.S. President Trump, the global economy continues to improve in the background. As a result, equity markets have been well supported and continued to push higher. Bond yields have stabilized after their sharp rise in late 2016.
Under our somewhat benign global outlook—we project around 3% global growth over the next 12 months—central banks will be left to manage a difficult balancing act. Following years of aggressive monetary stimulus, the question of scaling back this support may have unintended consequences. This will be a risk to monitor over the coming year.
- Fixed Income vs. Equity: With a continued economic expansion and interest rates facing gradual upward pressure, equities should remain more attractive than bonds.
- Equity: Emerging Asian equity markets remain our preferred global equity region, but European equities currently offer good potential for catch-up growth at a reasonable price.
- Fixed Income: Bond yields in the United States and Canada are expected to head higher, but the rise in yields should be modest.
- Currencies: We expect limited and selective U.S. dollar strength while a select number of emerging market currencies could provide attractive returns.
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