The risks from rising rates are potentially higher in New Zealand than elsewhere given the overvaluation of equities and the housing market. We advise investors to underweight NZ equities, fixed income in general, and the NZ dollar.
Equity markets dazzled investors in 2017, as an uptick in global economic activity helped lift expectations for corporate earnings growth across developed and emerging markets. The performance of equities and other asset classes are reviewed in this chart book.
The new US tax bill creates little pressure for immediate action by individual investors, even though we expect the legislation to be quite impactful.
Investors should expect more of the same in 2018, as many of the factors that drove risk assets higher this year remain in force. Still, 2017’s returns will be difficult to top for many asset classes, and investors should keep a wary eye out for unexpected inflation and geopolitical risks.
In our 2018 outlook, we review the prospects for several asset classes—developed and emerging markets equities, credit, real assets, sovereign bonds, and currencies—and share the advice of our chief investment strategist.
In our opinion, institutional investors are better served focusing on investing in companies seeking to profit from the development and adoption of blockchain technology and “fintech” (financial technology) more broadly than holding cryptocurrencies directly.
It sure looks like it. The increasingly unforgiving nature of public equity markets, coupled with the continued evolution and growth of private investment markets, is making it easier for more companies to stay private, with some CEOs avowing to do so indefinitely.
We would not seek to position portfolios specifically for tax reform as markets have already priced in some improvement in earnings from tax cuts, and the winners and losers from the proposed tax changes will not be clear until more details are provided. Global cyclical and value stocks offer better risk/reward prospects as they should benefit if tax reforms are passed, but are not reliant on such an outcome.
Institutional investors should very carefully consider the risks of cryptocurrencies before investing.
China has recently opened its domestic bond market to foreign investors. At first glance this is a huge opportunity for investors. However, as with many things in China, the story is more complicated than it appears.