# The Investment Outlook Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-08-02 Category: INVESTING Category URL: https://financedigest.com/category/investing Meta Title: Confident Market Outlook with deVere Group: S&P500 Hits Meta Description: Stay ahead of the market with insights from Tom Elliott at deVere Group. From high corporate bond yields to the rise of Doctor Copper, get expert advice. URL: https://financedigest.com/the-investment-outlookhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/img0020-2001-1736843627580-compressed.jpg) **Tom Elliott,** deVere Group **Near-term market sentiment:** Confident, with risk assets still in demand. The S&P500 continues to reach new highs and U.S corporate [bond yields](https://www.financedigest.com/sovereign-bond-yields-not-yet-reached-a-summit-reuters-poll.html "Sovereign bond yields not yet reached a summit – Reuters poll") are touching new lows. In the ‘real’ economy Doctor [Copper – so called because moves in the copper price have historically foretold changes in global output](https://www.financedigest.com/anglo-americans-first-quarter-copper-output-rises-28.html "Anglo American’s first-quarter copper output rises 28%") and GDP- is giving a positive prognoses, with the copper price at a two-year high. A weak dollar is currently supportive. However, investors should remain diversified with exposure to both defensive assets (eg, government bonds and cash) as well as risk assets (eg, [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks") and high yield bonds), given the unpredictability of market movements. The model [portfolio below offers](https://www.financedigest.com/passendo-partners-with-leading-media-company-audienzz-to-revolutionise-its-ad-offer-in-a-portfolio-of-over-70-premium-newsletters.html "Passendo partners with leading media company, audienzz, to revolutionise its ad offer in a portfolio of over 70 premium newsletters") a guide as to how to achieve this. **Why have markets defied expectations?** The year-to-date returns from global [stock](https://www.financedigest.com/yes-winning-the-euros-really-can-help-your-stock-market.html "Yes, winning the Euros really can help your stock market") markets have exceeded the cautious expectations posted at the start of January. The MSCI [World index of developed stock markets](https://www.financedigest.com/world-stocks-slip-as-markets-await-u-s-midterms-outcome.html "World stocks slip as markets await U.S. midterms outcome") is up 13% in USD and 10% in local currency, with gains evenly spread by geographical region. The MSCI [Emerging Markets](https://www.financedigest.com/surgical-masks-market-emerging-trends-and-will-generate-new-growth-opportunities-status-2030.html "Surgical Masks Market: Emerging Trends and Will Generate New Growth Opportunities Status 2030") index is up in 25% USD and 20% in local currency terms, reflecting investors’ appetite for risk. Gains have been driven by [relief that some of the bad things forecasted](https://www.financedigest.com/pressure-relief-valve-market-is-expected-to-register-highest-cagr-of-3-5-during-the-forecast-period-2021-to-2031persistence-market-research.html "Pressure Relief Valve Market Is Expected To Register Highest CAGR Of 3.5% During The Forecast Period 2021 to 2031:Persistence Market Research") have not materialised. For example, nationalist [parties did not take power](https://www.financedigest.com/italys-right-wing-parties-seen-winning-power-exit-polls.html "Italy’s right-wing parties seen winning power – exit polls") in the Netherlands and France. Instead [investors in continental Europe](https://www.financedigest.com/analysis-investors-route-to-post-covid-china-is-via-europe.html "Analysis-Investors’ route to post-COVID China is via Europe") were delighted when the centrist and pro-E.U [Macron won the presidency](https://www.financedigest.com/french-president-macron-reaffirms-that-pensions-system-reform-is-necessary.html "French President Macron reaffirms that pensions system reform is necessary") and then a parliamentary majority. Trump did not announce 40% tariffs on Chinese imports on taking office and has not done anything too damaging as yet to the domestic or [global economy](https://www.financedigest.com/global-economy-collapse-just-one-click-away.html "Global economy collapse just one click away"), and the Chinese financial sector has not collapsed under the weight of bad debt. Perhaps of greatest impact, the Fed has been more cautious over the outlook for future interest [rate hikes](https://www.financedigest.com/ecb-to-go-big-again-on-oct-27-with-75-bps-rate-hike-reuters-poll.html "ECB to go big again on Oct. 27 with 75 bps rate hike: Reuters poll"), suggesting that cheap money may be around for longer than previously expected, so adding impetus to the ‘search for yield’ that has driven the rally in risk assets since 2009. There have also been surprises: U.S and global corporate [earnings growth has been stronger than expected](https://www.financedigest.com/bone-growth-stimulators-market-is-expected-to-earn-a-valuation-of-us-2-1-bn-by-2027.html "Bone Growth Stimulators Market is Expected to Earn a Valuation of ~US$ 2.1 Bn by 2027"), reflecting solid growth in global demand. The [recovery in demand within the euro zone](https://www.financedigest.com/euro-zone-services-booming-but-sentiment-recovery-may-have-stalled-ecbs-lane.html "Euro zone services booming but sentiment recovery may have stalled -ECB’s Lane") continues, with euro zone GDP now running at a touch above 2% year-on-year, which is comparable with the U.S and above the 1.7% recorded for the U.K. By the end of last week 56% of the S&P500 had reported their [second quarter](https://www.financedigest.com/dollar-pares-gains-as-us-growth-contracts-for-second-quarter.html "Dollar pares gains as US growth contracts for second quarter") earnings results, representing 70% of the index by market capitalisation. 73% of these companies had exceeded expectations. **Can stock market gains persist?** The world’s largest market -the U.S, which currently makes up 59% of the MSCI [World index – is richly priced](https://www.financedigest.com/gas-price-surge-just-one-more-headwind-for-world-economy.html "Gas price surge, just one more headwind for world economy"), both on a forward price/ earnings multiple and using cyclically adjusted earnings. But mispricing – if that is what it is- can persist for a long time. As long as bond yields remain low, and the Fed remains cautious, the search for [yield will continue to support global stock markets](https://www.financedigest.com/u-s-stock-markets-treasury-yields-perk-up-oil-falters-as-choppy-week-winds-down.html "U.S. stock markets, treasury yields perk up, oil falters as choppy week winds down"). The Fed’s own valuation model shows stocks attractively priced compared to bonds: 10-year inflation linked bonds yield 0.47%, while the S&P500 dividend yield stands at 1.9%. The lack of progress by Trump and Congress in passing fiscally-simulative policies will continue to lead to downgrades of [future GDP growth forecasts](https://www.financedigest.com/plug-in-hybrid-electric-vehicles-phev-market-trends-growth-future-demand-analysis-and-forecast-by-2026.html "Plug-in Hybrid Electric Vehicles (PHEV) Market Trends, Growth, Future Demand, Analysis and Forecast by 2026") for the U.S, but this has probably been already priced into the most affected [stocks as well as into the dollar](https://www.financedigest.com/stocks-dollar-pause-ahead-of-powell-biden-speeches.html "Stocks, dollar pause ahead of Powell, Biden speeches"). --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---