SCB urges investors to weigh equities, bond options in 2018
Emerging Market bonds, preferably the Asian dollar-denominated bonds, are expected to outperform those of the U.S. and Europe on the back of a modestly weaker dollar and relatively attractive yields.
The bank in its Wealth Management Advisory Outlook 2018, predicted a continued gradual expansion of output, combining a modest stronger economic growth with rising inflation.
According to the Chief Investment Strategist at Standard Chartered Bank, Steve Brice, “growth accelerated in 2017, but inflation did not. We believe a gradual ‘heating up’ of the global economy is likely in 2018, with robust economic growth and inflation finally increasing.
“Our Outlook 2018 report is designed to help our clients navigate these market conditions. Economic growth continues to simmer. The ‘Goldilocks’ environment- not too hot, not too cold, of strong growth and limited inflation is likely to extend into the early part of 2018.
“Continued earnings’ growth means equities and corporate bonds have room to extend gains going into 2018. Inflation is the main risk to this ‘Goldilocks’ scenario, especially further into 2018.
“A larger-than-expected rise in inflation would mean the environment could turn too hot, forcing central banks to tighten policy more aggressively than markets currently expect,” he said.
Commenting on the investment implications, Regional Head of Wealth Management for Africa, the Middle East and Europe and Head of Wealth Management for the UAE, Standard Chartered Bank, Gautam Duggal, said: “We suggest investors continue to tilt towards equities, which generally do well in the late stage of the economic cycle, as we do not believe valuations are a constraint to a strong performance in 2018.
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