US Treasury (UST) yields ended higher in January as weaker-than-expected payroll data led markets to moderate their forecasts for Federal Reserve (Fed) rate hikes in 2017.
Given the challenges, why bother?
Our head of Global Strategy in New York analyzes and forecasts the developments of major topics arising from the new Administration.
Donald Trump winning the US presidential election delivered a big surprise, defying poll predictions but ringing consistent with the wave of populism sweeping the developed world.
Credit markets are expected to have another positive year. We expect economic growth in Asia to be stable but see some potential downside risks.
Global economic, credit and interest rate cycles are becoming desynchronised. In this paper, we introduce Nikko AM’s first generation default probability model for corporates.
In-depth report: Economic growth in Asia is expected to remain broadly stable in 2017. While there will be greater external uncertainties as well as country-specific challenges, Asian economies are, on balance, better equipped to deal with external pressures compared to a few years back.
Our Senior Portfolio Manager for Emerging Market Debt in London forecasts that in 2017, this asset class could well match 2016’s achievement.
As rates could rise further in 2017, we expect that a broad range of investment themes will help generate enough alpha performance to offset the rates impact.
Asia ex-Japan (AxJ) equities returned -2.0% in US Dollar (USD) terms, underperforming MSCI World and MSCI Emerging Markets (EM). Currencies across AxJ generally weakened against the dollar following the Federal Reserve's (Fed’s) decision to hike rates.
USTs weakened further in December, as caution prevailed following the November sell-off. As widely expected, the US Federal Reserve (Fed) raised interest rates by 25 basis points (bps).
As we start 2017, we expect the continued recovery in Japan’s economy will be driven by three factors outlined in this article.
Trump certainly is non-conventional, in many ways similar to Teddy Roosevelt. Hopefully, Japan can adapt to this new reality, and instead of blocking Trump's initiatives, be able to have acceptable compromise “deals” ready.
Nikko AM's Global Investment Committee's 2017 Outlook — More Economic and Equity Reflation, Despite Less Dovish Central Banks
Previously, capital markets had become highly conditioned to a “lower for longer” world, with the search for yield having implications both within and across risk asset classes.
We believe that in an increasingly uncertain world, Japan’s less uncertain market will provide a compelling opportunity for serious investors.
The phrase “lower for longer” could well become unfashionable very quickly after years of central banks combating the forces of deflation and wishing for inflation instead.
2016 may best be remembered as the year in which Trump won and the world changed. The question becomes which reforms will take centre stage.
The cumulative positioning of investors in companies and asset classes that are deemed safe in a “lower for longer” environment is undergoing a significant test at present.
Our China Fixed Income expert in Singapore expounds upon how the Trump election is forcing China into taking specific economic policies.
Asia ex-Japan equities returned -2.9% in US Dollar (USD) terms, underperforming MSCI World.
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.
A combination of key regional factors—including demographics, urbanization and existing infrastructure gaps—all point to sustainable growth for healthcare in Asia ex Japan.
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.
If the deal is adhered to then it is significant and will see the global oil market fall into under supply through 2017.
Given the release of the third quarter data, we update our decade-long theme about improving corporate governance in Japan.
Following Trump’s election, our Emerging Market team in London, supported by John Vail, our Global Chief Strategist, discuss what, at this early stage, we can potentially expect to see from the US regarding its relationship with Emerging Market economies.
October was another difficult month for Global credit markets, in particular for Investment Grade bonds. By contrast, more risky High Yield bonds outperformed.
Our oil experts in the US and London analyze the Saudi oil conundrum.
Our Senior Portfolio Manager for Asian equities reflects on Asian markets in the wake of Trump’s Triumph.
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.
Asia ex-Japan equities returned -1.5% in US Dollar (USD) terms, outperforming the MSCI World which declined by 1.9%.
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.
Much like the BREXIT result, Americans surprised the consensus with an anti-establishment vote.
Our Senior Portfolio Manager for ASEAN equities reviews the trend towards Strongman rule in ASEAN.
Advances in science and technology are continuously changing and progressing the medical profession and broader healthcare industry. While the industry growth will be strong, not all participants will fare equally.
Our Multi-Asset portfolio manager based in Singapore reviews the prospects for profit margin expansion in the three main Emerging Market regions.
"Find growth and you will find performance" was our Asian Equity investment mantra in early 2016 as the world grappled with slowing growth and lethargy with monetary experimentaton in low and depressed interest rates.
Emerging markets (EM) have endured strong adjustments in commodities and currencies that coupled with reforms makes a good case for better growth ahead.
Asia ex-Japan equities rose in September, returning 1.6% in US Dollar (USD) terms and outperforming both the MSCI World and MSCI Emerging Markets indices.
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.
No turning back — 2% inflation target not only intact but enhanced with a new “inflation overshooting commitment”
Although it is tempting to join the ‘peak demand’ bandwagon, as investors it is important to understand the impact that different technologies (and their timing) have on energy prices.
Our UK expert on BREXIT and our chief global strategist respond to Japan’s concern about its investments in the UK.
QE policies have had a material impact on bond yields and valuations. We believe that the evolution of these policies will be more important than fundamentals in indicating when bonds can break the cycle of ever-declining yields.
Central bank policy from the US, Japan and Europe are strongly affecting the current global fixed income markets. New Zealand and Canadian economies also face continued pressure.
Given how important central bank policies are for the pricing of assets, our focus has to be on what they do next. If debt monetisation were to occur, it would have significant implications for equity investing.