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Market outlook

April 2018 (covering March 2018)

US

  • The US equity market fell in March due to a technology correction and simmering global trade tensions. As a result, the share prices of financials, materials and technology stocks retreated.
  • US stocks should benefit from the acceleration in US economic growth as well as the recently passed tax reform legislation.

Europe (including UK)

  • The European and UK equity markets retreated in March because of global trade worries. Investors were somewhat relieved when the White House declared a temporary exemption for the European Union and other nations on the steel and aluminum levies.
  • Valuations on European equities are attractive — especially compared to the US. Though the ECB is tapering QE, its balance sheet is still expanding and inflation is still below target.

Asia Pacific (ex Hong Kong ex China ex Japan)

  • Asia ex-Japan equities fell in March, triggered by concerns about global growth and trade tensions between the US and China. In terms of sector performance, the utilities sector outperformed high-beta financials and materials sectors.
  • We believe Asian markets will remain well-positioned for further strength on the back of favourable economic outlook and supportive government policies.

Hong Kong and Mainland China (H-shares)

  • Hong Kong equities fell in March as a result of a potential trade war between the US and China. In terms of sector returns, utilities fared better than the rest. Chinese equities declined with the MSCI China Index recording a negative return of -3.3%.
  • Our view towards China and Hong Kong markets remains unchanged despite the return of market volatility since the beginning of 2018. We expect economic conditions in Hong Kong and China to stay stable this year.

Japan​​​​​​​

  • Japan’s equity market ended March lower, ruffled by concerns related to global trade tensions, some mixed economic data and domestic political uncertainty.
  • We believe the Japanese equity market will benefit from the continuation of a very accommodative domestic monetary policy environment and global growth.

Fixed Income​​​​​​​

  • In March, government bonds outperformed corporate bonds as equity market volatility rose and increased demand for the perceived stability of government bond markets.
  • Given the backdrop of strong global growth, stable inflation and restrictive monetary policy, we prefer corporate bonds over government bonds.

Emerging Markets​​​​​​​

  • Increased trade tensions and the first US interest rate hike of 2018 provided headwinds for emerging equity markets during March with all regions registering losses. From a sector perspective, cyclicals underperformed defensives.
  • We continue to favour EMEA and Latin America. In both cases this is driven by equity valuations. In particular, we are finding more attractively priced companies in Russia, Brazil and South Africa.
     

2018 Investment Outlook

We are dedicated to helping clients achieve their investment objectives

We are dedicated to helping clients achieve their investment objectives

The surging markets of the past year have taken place against a backdrop of macro developments whose long-term impact on the world economy has yet to be realized:  uncertainty regarding the UK’s withdrawal from the European Union, potential tax reform in the US, North Korea’s nuclear weapons testing, continued oil price volatility and the outcome of key elections in Germany, France, Iran and other countries.

With this as context, the year ahead promises to be interesting and challenging as well.  In this dynamic environment, we have a strong view that clients are best served by portfolios that combine the advantages of active, passive and alternative capabilities.

At Invesco, we’ve built our firm over many years with a single focus:  to help clients achieve their investment objectives in a variety of markets.  We provide a comprehensive range of investment capabilities, delivered through a diverse set of investment vehicles.  We draw on this comprehensive range of capabilities to provide customized solutions designed to deliver key outcomes aligned to client needs, which are our most important benchmark.

Our experienced investment teams are located in locations all over the globe, which we believe is a real strength of the firm.  Maintaining a presence on the ground in key cities enables our investment teams to stay close to developments that impact the markets and the companies in which they invest.

An important part of achieving your investment objectives depends on keeping ahead of the dynamics that drive movements in the global markets.  Working with our investment teams, we’ve developed this 2018 outlook to provide insights that can help you plan for the future and make decisions about your investments.

We hope you find this information helpful.  As always, we remain focused on helping clients achieve their investment objectives – wherever the markets take us.
 

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