Nikko AM's Global Investment Committee's 2017 Outlook — More Economic and Equity Reflation, Despite Less Dovish Central Banks
Our China Fixed Income expert in Singapore expounds upon how the Trump election is forcing China into taking specific economic policies.
UST yields surged in the month as Trump's election victory prompted expectations of a significant fiscal package and possible upside inflation risk under the new administration.
Following the US election, we have seen bond rates continuing to increase, a stronger US dollar, firmer commodity prices, and a US stock market at all-time highs. Is optimism around the US President-elect’s fiscal expansion masking the true deflationary picture?
We expect Italian assets to underperform until it becomes clear who will be able to form and lead a new government. Nevertheless the outcome of the referendum was already priced into financial markets.
October was another difficult month for Global credit markets, in particular for Investment Grade bonds. By contrast, more risky High Yield bonds outperformed.
Neither Brexit nor Trump’s win was an accident – ‘the people’, in particular the working and middle classes, are purposefully and deliberately giving the political elites a thump on the nose.
USTs ended lower in October. Better US economic data and a hawkish statement from the Federal Open Market Committee (FOMC) bolstered expectations of a December interest rate hike.
USTs ended September mixed. While the Federal Reserve left interest rates unchanged and the Bank of Japan reinforced commitment to monetary easing, the ECB's lack of new stimulus disappointed the market.
It has continued to be a wild roller-coaster ride for investors, and unfortunately, it is not likely to be very calm for the foreseeable future. Investors must keep a keen eye on geopolitical risk and be ready to act if such appear to accelerate into a situation that could significantly impact markets.