House View Q4 2016
Aviva Investors expects the global economy to move in a more reflationary direction.
We expect global economic growth to pick up gradually, with inflation also set to rise, albeit from historically low levels. With global monetary policy likely to remain accommodative, and fiscal policy expected to take a more significant role, the world is expected to head in a more reflationary direction.
These views are described in more detail in our latest quarterly House View document, which encapsulates the thinking of our investment professionals across asset classes. The report outlines global macroeconomic prospects, identifies the key themes that will frame investment decision-making over that period and underscores the main risks. It also considers the implications of those views across a range of markets.
This year has been characterised by ever more global monetary stimulus. That has provided a boost to many asset classes, despite the various risks that have materialised. We expect that as global reflation rises, the prospects for fixed income markets, in particular, become more challenging.
Looking forward, the US is expected to raise interest rates slowly, while other central banks are reaching the end of the road for additional policy stimulus.
Worries about growth in China have fallen during 2016, while recoveries in Europe and the US have continued, albeit at a modest pace. The fallout from the UK’s ‘Brexit’ decision, as well as upcoming political events including the US presidential election, the Italian constitutional reform referendum and a number of important European elections, have the capacity to upset financial markets. Politics has played, and will continue to play, a key part in investment decisions. The growth of nationalism, rising inequality and a sense of injustice among electorates are themes that look set to continue.
The UK has embarked on a long and potentially bumpy road to EU exit. Growth will be negatively impacted and the inevitable extended period of uncertainty will be a difficult backdrop for households, companies and financial markets.
Japan is at a critical juncture, with the Bank of Japan reshaping its policy framework in a way that points to a closer relationship between monetary and fiscal policy in future. The country could yet set a new benchmark for unconventional policy stimulus that others may follow.
Download the House View Q4, October 2016
The Aviva Investors House View document is a comprehensive compilation of views and analysis from the major investment teams.
The document is produced quarterly by Aviva Investors investment professionals and is overseen by the Investment Strategy team. The House View document serves two main purposes. First its preparation provides a comprehensive and forward-looking framework for discussion among the investment teams. Second, it allows us to share our thinking and explain the reasons for our economic views and investment decisions to those whom they affect.
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