- Our investment stance will continue to tilt toward equities until credit conditions tighten enough to make an economic downturn inevitable. As things stand, we believe that is several years off.
- Leading economic indicators suggest the global economic expansion, led by the U.S., and accompanying earnings growth should have further to run. While equity markets may experience additional volatility over the near term due to weak commodity prices and uncertainties surrounding China’s economic path and currency policy, these headwinds should abate as the year unfolds. By the second half of 2016, we anticipate the U.S. secular bull market that began in early 2009 will resume its course, and other developed equity markets will deliver worthwhile returns.
- We recommend investors with a 12-month or longer time horizon maintain a full commitment to equities at the long-term targeted allocation level. We favor the U.S., Japan, and Europe.
- Monetary policy should continue to occupy fixed income investors’ attention in 2016. But policy divergence may not be as wide as some are expecting.
- Even though the Federal Reserve recently launched its rate hiking cycle, it may raise rates only twice this year, in our view. We expect the Fed Funds rate to peak at a level well below that of prior cycles and lower than what the market is anticipating, perhaps as low as 2%. The European Central Bank will likely continue to ease, but at a less aggressive pace than previous years. And while Japan and Canada could loosen policy further, it is not a fait accompli.
- The widening of credit spreads has created attractive opportunities in segments of the U.S. and European investment-grade corporate bond market, particularly among BBB-rated issuers.
Global Asset Views
Source - RBC Wealth Management
(+/=/–) represents the Global Portfolio Advisory Committee’s (GPAC) view over a 12-month investment time horizon.
+ Positive implies the potential for better-than-average performance for the asset class or for the region relative to other asset classes or regions.
= In-line implies the potential for average performance for the asset class or for the region relative to other asset classes or regions.
– Negative implies the potential for below-average performance for the asset class or for the region relative to other asset classes or regions.