BNP Paribas Investment Partners presents its latest views and expectations.
This new outlook is designed to help investors prepare for 2017 by setting the scene for a year in which a new landscape awaits: the world’s largest economy is coming under new leadership and leading central banks are expected to gear up for either policy tightening ─ specifically in the US ─ or softer quantitative easing policies, mainly in the eurozone and possibly in Japan.
Corporate fundamentals may gain in importance in determining asset class returns, while Donald Trump’s election to the US presidency will likely have investors tracking anti-establishment sentiment elsewhere more closely now.
Uncertainties and open questions, including the outlook for fiscal stimulus and globalisation, suggest to us that global growth will be muted again, even if a pickup in inflation looks unlikely to require an about-turn in monetary policy.
Our key convictions and conclusions for 2017:
Structural factors including weak global trade, low productivity and excessive debt are likely to keep growth at a distinctly pedestrian pace.
Profound changes in the course of US interest rates, inflation, equity markets and growth could shift the focus of markets to fiscal largesse, but uncertainty over the durability of any boost to growth is high.
Risks to stability and continuity include rising populism, disquiet over globalisation inequality, and possibly greater protectionism.