State Street positive in 2018 global outlook
12 December 2017 Boston
Image: Shutterstock
While 2018 will be positive for risk assets, the maturity of the growth cycle and a number of structural uncertainties will warrant a degree of caution, according to State Street Global Advisors.
In its global market outlook for 2018, State Street Global Advisors predicted generally positive global growth, with a return to the historical trend rate of around 3.7 percent, evenly distributed around the world.
State Street suggested this will bolster company earnings and pushing equity markets higher.
However, the outlook added that, eight years into the growth cycle, investors may be wary of the potential for a pullback.
Though it has concerns, State Street sees the best opportunities within the US, while Japan and Europe are also attractive.
There may also be opportunities in bond markets. Although the Federal Reserve and European Central Bank are expected to raise their rates, State Street suggested that rates will still remain relatively low.
Rick Lacaille, global chief investment officer for State Street Global Advisors, said: 鈥淭he slow but steady improvement in global growth, coupled with modest inflation, provides the kind of macro environment that can continue to lift markets higher.鈥�
He added: 鈥淲hile we are unlikely to see the bond bull to keep charging in 2018, we do think the bears will probably be proven wrong for another year, even as the Fed is expected to raise rates and other major central banks begin tapering their accommodative policy. That said, investors need to balance duration and credit risks carefully. While emerging market debt valuations have become less attractive, a tilt towards quality can continue to deliver results.鈥�
Lori Heinel, deputy global CIO for State Street Global Advisors, said: 鈥淗istorically low interest rates and policy-driven liquidity following the global financial crisis have challenged active managers through higher correlations and lower volatility.鈥�
She added: 鈥淭hat backdrop is changing. However, careful consideration of where, when and how to go active is essential in order to strike the right balance alongside smart beta and core index exposures.鈥�
The outlook follows State Street鈥檚 recent fee revenue increase in Q3 2017, primarily driven by securities finance revenue as well as strength in servicing fees, and the impact of the weaker US dollar.
State Street also benefited from higher global equity markets in Q3 as servicing and management fees increased 4 percent and 14 percent respectfully, compared to Q3 2016.
In its global market outlook for 2018, State Street Global Advisors predicted generally positive global growth, with a return to the historical trend rate of around 3.7 percent, evenly distributed around the world.
State Street suggested this will bolster company earnings and pushing equity markets higher.
However, the outlook added that, eight years into the growth cycle, investors may be wary of the potential for a pullback.
Though it has concerns, State Street sees the best opportunities within the US, while Japan and Europe are also attractive.
There may also be opportunities in bond markets. Although the Federal Reserve and European Central Bank are expected to raise their rates, State Street suggested that rates will still remain relatively low.
Rick Lacaille, global chief investment officer for State Street Global Advisors, said: 鈥淭he slow but steady improvement in global growth, coupled with modest inflation, provides the kind of macro environment that can continue to lift markets higher.鈥�
He added: 鈥淲hile we are unlikely to see the bond bull to keep charging in 2018, we do think the bears will probably be proven wrong for another year, even as the Fed is expected to raise rates and other major central banks begin tapering their accommodative policy. That said, investors need to balance duration and credit risks carefully. While emerging market debt valuations have become less attractive, a tilt towards quality can continue to deliver results.鈥�
Lori Heinel, deputy global CIO for State Street Global Advisors, said: 鈥淗istorically low interest rates and policy-driven liquidity following the global financial crisis have challenged active managers through higher correlations and lower volatility.鈥�
She added: 鈥淭hat backdrop is changing. However, careful consideration of where, when and how to go active is essential in order to strike the right balance alongside smart beta and core index exposures.鈥�
The outlook follows State Street鈥檚 recent fee revenue increase in Q3 2017, primarily driven by securities finance revenue as well as strength in servicing fees, and the impact of the weaker US dollar.
State Street also benefited from higher global equity markets in Q3 as servicing and management fees increased 4 percent and 14 percent respectfully, compared to Q3 2016.
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