# Market Outlook for 2017 Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-01-25 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Global Investment Outlook for 2017 Meta Description: Read David Absolon's analysis on global markets, growth outlook, and investment strategies for 2017. Stay informed and make wise investment decisions. URL: https://financedigest.com/market-outlook-for-2017html ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/sh8-5452-870-1-1736844248079-compressed.jpg) By **David Absolon,** Investment Director at Heartwood Investment Management The year has started on a positive note, which has not just been driven by revised expectations of US growth but also broader improvements in global manufacturing surveys and confidence indicators. In developed economies, labour markets remain supportive of future consumption and we expect corporate profitability to improve in a slightly more reflationary environment. [Rising confidence](https://www.financedigest.com/asian-shares-rise-after-consumer-confidence-boosts-nasdaq-to-record-high.html "Asian shares rise after consumer confidence boosts Nasdaq to record high") has been reflected in positive financial market performance since the US election. However, fundamental change, if any, takes time and as expectations have [raced ahead](https://www.financedigest.com/flutter-q1-revenues-jump-29-as-u-s-races-ahead-uk-bounces-back.html "Flutter Q1 revenues jump 29% as U.S. races ahead, UK bounces back") of reality there is the potential for disappointment in the short term. We expect any pullback to be a pause rather than anything more serious. Policy uncertainty – whether driven by Trump, Brexit or [national elections](https://www.financedigest.com/quebecs-elected-officials-must-swear-oath-to-king-charles-to-sit-in-national-assembly.html "Quebec’s elected officials must swear oath to King Charles to sit in National Assembly") in Europe – will continue to aggravate markets and may potentially be a source of disruption. Overall, we believe that [global growth](https://www.financedigest.com/london-stocks-fall-1-on-weak-global-growth-outlook.html "London stocks fall 1% on weak global growth outlook") will be stronger in 2017 and this should support investor appetite. However, acknowledging that underlying risks do not suddenly disappear, we are also [retaining reasonable levels of liquidity](https://www.financedigest.com/companies-are-empowered-to-retain-control-with-alternative-routes-to-liquidity.html "Companies are empowered to retain control with alternative routes to liquidity") to take advantage of periods of volatility as they inevitably occur. Although sterling has seen meaningful weakness, we are not yet ready to bring money back into the UK and retain our preference for other developed economies. We continue to believe in the longer term investment case for emerging markets, but expect in the [near term it will remain](https://www.financedigest.com/automotive-glass-market-to-witness-sales-slump-in-near-term-due-to-covid-19-long-term-outlook-remains-positive.html "Automotive Glass Market to Witness Sales Slump in Near Term Due to COVID-19; Long-term Outlook Remains Positive") vulnerable to US policy risks. We are becoming more [positive on specific hedge fund opportunities](https://www.financedigest.com/infant-positioning-aids-market-application-trends-growth-opportunities-and-worldwide-forecast-to-2027.html "Infant Positioning Aids Market Application, Trends, Growth, Opportunities and Worldwide Forecast to 2027"), given the greater likelihood of increased stock dispersion (i.e. between [winners and losers), as well as credit long/short strategies](https://www.financedigest.com/the-pound-gilts-and-stocks-likely-winners-and-losers-from-uk-budget.html "The pound, gilts and stocks: likely winners and losers from UK budget"). **Equities:** Having gone overweight overall post the Trump win, there is no desire to add further to equity positioning at present. [Markets have given back some gains](https://www.financedigest.com/wi-fi-semiconductor-chipset-market-gain-impetus-due-to-the-growing-demand-over-2015-2025.html "Wi-Fi Semiconductor Chipset Market Gain Impetus due to the Growing Demand over 2015-2025") recently, but we expect this to be a pause rather than anything more serious. The [improved growth](https://www.financedigest.com/leno-bags-market-witness-a-spike-in-growth-pace-recent-improvements-in-pricing-models-fmi.html "Leno Bags Market Witness a Spike in Growth Pace Recent Improvements in Pricing Models: FMI") picture is supportive, and the start of earnings season has so far been encouraging. We are holding a greater exposure to US equities than we have had for some time. We maintain overweight positions in the [cyclical markets](https://www.financedigest.com/cyclic-innovation-to-drive-the-bio-implants-market.html "Cyclic innovation to drive the Bio Implants Market") of Europe and Japan, which represent attractive value on a relative basis and are expected to benefit from a corporate earnings recovery. We continue to underweight the UK, but expect to be rebuilding exposure in the [medium term](https://www.financedigest.com/ab-inbev-aims-for-core-profit-growth-of-4-to-8-over-medium-term.html "AB InBev aims for core profit growth of 4% to 8% over medium term"). We are not yet ready to add to our [emerging markets](https://www.financedigest.com/analysis-after-sanctions-barrage-russias-emerging-market-allies-explore-workarounds.html "Analysis-After sanctions barrage, Russia’s emerging market allies explore workarounds") exposure, given vulnerability to headwinds in the near term. However, we [remain optimistic on a longer term](https://www.financedigest.com/german-economic-growth-to-remain-muted-in-near-term-imf.html "German economic growth to remain muted in near term – IMF") view and would use any weakness as an opportunity to add. **Bonds:** We are maintaining our long-standing short duration position to reflect gradual reflation and the shifting bias of some [central banks](https://www.financedigest.com/marketmind-rba-shock-hike-starts-huge-week-for-central-banks.html "Marketmind: RBA shock hike starts huge week for central banks") towards a more balanced tone. The US Federal Reserve is very slowly normalising interest [rates and the European Central Bank](https://www.financedigest.com/central-banks-ease-off-on-rate-hike-push-in-october.html "Central banks ease off on rate hike push in October") will scale back its asset purchase programme this year. If [yields rise](https://www.financedigest.com/world-equities-fall-u-s-treasury-yields-rise-after-hawkish-fed.html "World equities fall, U.S. Treasury yields rise after hawkish Fed") to a meaningful degree, we may take the opportunity to extend duration as our shorter-dated bonds mature. We have also sold our US High Yield energy position following strong performance and expect to recycle assets into the broader high yield [market to take advantage of potentially higher US growth](https://www.financedigest.com/modified-starch-market-potential-growth-share-demand-and-analysis-of-key-players-forecasts-to-2032.html "Modified Starch Market Potential Growth, Share, Demand and Analysis of Key Players – Forecasts to 2032"). We are maintaining our modest allocation to [emerging market](https://www.financedigest.com/allergy-immunotherapy-market-emerging-players-may-yields-new-opportunities-2017-2025.html "Allergy Immunotherapy Market: Emerging Players May Yields New Opportunities 2017-2025") sovereign debt (hard currency), given our expectations that the asset class should benefit from cyclical and structural economic improvements. **Property:** We remain underweight in UK [commercial property](https://www.financedigest.com/rouzbeh-pirouz-on-investing-in-commercial-property-as-the-uk-emerges-from-the-pandemic.html "Rouzbeh Pirouz on Investing in commercial property as the UK emerges from the pandemic") on concerns around supply, especially in the South East, and uncertainties around Brexit. Our portfolios are invested in diversified and select [parts of the market](https://www.financedigest.com/the-automotive-aluminum-extruded-parts-market-to-climb-upwards-through-innovation-at-a-cagr-of-5-8-between-2021-and-2031.html "The Automotive Aluminum Extruded Parts Market to climb upwards through innovation at a CAGR of 5.8% between 2021 and 2031"). Across sectors, we continue to seek income [opportunities in the industrials](https://www.financedigest.com/plant-based-beverages-market-growth-opportunities-industry-analysis-size-share-geographic-segmentation-and-competitive-landscape-report-to-2028.html "Plant-based Beverages Market Growth Opportunities, Industry Analysis, Size, Share, Geographic Segmentation And Competitive Landscape Report To 2028") and offices. On a regional basis, we are invested in cities outside of London, which are less exposed to the ‘Brexit’ fallout. Outside of the UK, we are also looking at opportunities in the US REIT ( [real estate](https://www.financedigest.com/real-estate-brokers-vs-agents-which-one-should-you-work-with.html "Real Estate Brokers vs. Agents: Which One Should You Work With?") investment trust) market, where valuations have cheapened but are not yet compelling. **Commodities:** An improving [global economic](https://www.financedigest.com/putin-says-west-is-triggering-a-global-economic-crisis.html "Putin says West is triggering a global economic crisis") environment, reflation and a tighter supply/demand balance leads us to hold a more positive view on commodities in 2017, particularly for oil and base metals. Direct access to this [market is through owning futures](https://www.financedigest.com/title-n95-mask-market-future-is-set-for-massive-growth-with-high-revenue.html "N95 Mask Market Future is Set for Massive Growth with High Revenue") contracts rather than the physical assets and while the risk/return profiles are looking more attractive across some parts of the complex, they are not yet at levels where we are ready to invest. We have also bought gold in some strategies as a [portfolio diversifier](https://www.financedigest.com/how-to-successfully-diversify-your-portfolio.html "How to Successfully Diversify Your Portfolio"). **Hedge funds:** While we have held a limited allocation to hedge funds in recent years on concerns around performance, we believe that a shifting economic climate should [create more opportunities](https://www.financedigest.com/tire-materials-market-to-create-an-incremental-opportunity-of-us-99-99-bn-by-the-end-of-2028-fmi.html "Tire Materials Market to create an incremental opportunity of US$ 99.99 Bn by the end of 2028 – FMI") in this sector in 2017. Our preference remains for macro/CTA strategies, but we are also taking a more positive view on equity [hedge strategies](https://www.financedigest.com/fx-hedging-strategies-to-protect-your-business.html "FX hedging strategies to protect your business"), given the greater likelihood of increased stock dispersion (i.e. between winners and losers), as well as credit long/short strategies. **Cash:** We have reasonable levels of liquidity across our portfolios both in cash and short-dated bonds, which we are ready to invest as and when we see specific opportunities. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---