Macquarie Investment Management Releases 2018 Global Investment Outlook: Global Equities and Sectors Within Real Assets Poised to Shine in 2018
Macquarie Investment Management issued its 2018 Global Investment
Outlook, suggesting that there are many asset classes globally worth
investor consideration such as global equities and real assets. The
outlook, titled The Way Forward, provides an in-depth perspective
across equities, fixed income, and alternatives and real assets.
“As we close the chapter on 2017 and look forward to next year, many
areas of the global investment landscape show promise,” said Shawn
Lytle, president of Delaware FundsSM by Macquarie and
deputy global head of Macquarie Investment Management. “We believe the
hallmark of 2018 will be careful security selection and high-conviction
investment decisions.”
Following are highlights of the firm’s outlooks for specific asset
classes:
Global
equities
While mitigating factors and risks exist for 2018, such as excessive
debt and historically high valuations, Macquarie believes there are
reasons for a range of relatively optimistic outlooks from the US to
Asian economies. While Macquarie’s teams maintain autonomous views and
investment processes, John Leonard, global chair of equities for
Macquarie Investment Management, who governs the firm’s 12 equities
boutiques, sees the following themes across the diverse equity teams’
current market perspectives:
-
In the US, signs of real wage growth, an upturn in capital spending,
and resulting improvements in productivity are all potential
positives, while passage of tax reform could add another year or two
to the current expansion.
-
Macquarie sees greater overall potential in developed equity markets
outside the US, such as in Europe where fundamentals and valuations
are attractive – for example in France, where reforms are driving real
economic change.
-
Australian equities are facing some headwinds, from energy costs to
threats of online retailing, but China’s influence remains positive.
-
In Asian equity markets, China’s evolving growth and innovation goals
remain a key catalyst while Japan’s structural reforms are driving
real gross domestic product (GDP) growth and equity market prospects
remain promising.
-
Global risks include excessive indebtedness in the government and
corporate sectors; sub-par economic growth; political dysfunction;
unintended central bank effects; and rising geopolitical conflicts.
According to Leonard, “Investors get a 2% dividend yield. Add in 1% for
stock buybacks and another percentage point for modest inflation and
then another point or so for GDP growth, and you’re looking at a strong
argument for base-rate returns on the S&P 500® Index that
approach mid-single digits which is in line with our expectations.”
Global
fixed income
In 2018, Macquarie anticipates steady fixed income markets on the back
of global economic momentum, with structural forces continuing to exert
a cap on inflation and interest rates. The firm expects a muddle-along
kind of year for bond prices, where recession risk is low but upside is
contained.
“The Federal Reserve has raised rates a few times and signalled the
start of unwinding its balance sheet, while other Central Banks
continued with Quantitative Easing and negative interest rate settings,
notably Europe and Japan,” said Brett Lewthwaite, global co-head of
fixed income for Macquarie Investment Management. “While there has been
a subtle shift by Central Banks, when I look around the world
collectively, things haven’t changed that much from where we were a year
ago. Central Banks continue to be a primary influence in fixed income
markets. And if something flares up in 2018 or 2019 that might
destabilize economies, it still seems likely that Central Banks would
step in to contain the event.”
Key expectations:
-
While it’s reasonable to expect positive returns in 2018, Macquarie
sees a year when bonds will likely move forward in muddling fashion.
-
Although growth appears healthy, Macquarie forecasts rates to remain
range-bound, with the 10-year US Treasury rate likely to stay between
2.0% and 2.6%.
-
Macquarie believes structural forces limiting inflation should
continue to exert their current power.
-
Policy makers have narrow options for next steps and their decisions
are likely to be predictable.
-
Investors are likely to continue to chase yield.
“We are at the point in the cycle – or will be very soon – where
investors might benefit from including some high-quality, long-duration
assets as a source of balance in their portfolios,” said Roger Early,
global co-head of fixed income for Macquarie Investment Management.
“Duration is not the enemy. In fact, we don’t expect rates to rise
materially. That may be the contrarian view and, to be sure, if you’re
building a one-asset portfolio, we wouldn’t suggest that it consist
totally of high-quality, long-duration bonds.”
Real
assets
The coming year looks compelling in infrastructure, even as investors
continue to await US policy outcomes. Macquarie believes forces such as
mobile technology and the rising global use of liquefied natural gas –
where US output is often helping meet global demand – are creating
fertile ground for investors. Though it’s hard to say when a
government-financed infrastructure program may materialize in the US,
many investors appear poised to sign on to funding well-conceived
projects, and the health of the global economy appears very positive for
infrastructure capital investments.
The past year has also created significant opportunities in real estate.
Many global markets rallied higher in 2017 with the continued support of
central bank policies. A result is certain real estate markets with
stretched valuations but healthy fundamentals that bear watching.
Meanwhile, disruptions in commercial real estate related to the evolving
retail landscape have cascading effects that can present opportunities
to active investors.
To view the complete 2018 Global Investment Outlooks, visit: https://www.delawarefunds.com/outlooks-pr
About Macquarie Investment Management
Macquarie Investment Management is a global asset manager with offices
throughout the US, Europe, Asia, and Australia. As active managers, we
prioritize autonomy and accountability at the team level in pursuit of
opportunities that matter for clients. Our conviction-based, long-term
approach has led institutional and individual clients to entrust us to
manage $US246 billion in assets as of Sept. 30, 2017. Macquarie
Investment Management is a division of Macquarie Asset Management, a
global asset manager with $US361 billion in assets under management as
of Sept. 30, 2017.
Investing involves risk including the possible loss of principal.
The views expressed represent the Manager’s assessment of the market
environment as of the date indicated and should not be considered a
recommendation to buy, hold, or sell any security, and should not be
relied on as research or investment advice.
Duration measures a bond’s sensitivity to interest rates by indicating
the approximate percentage of change in a bond or bond fund’s price
given a 1% change in interest rates.
The S&P 500 Index measures the performance of 500 mostly
large-cap stocks weighted by market value, and is often used to
represent performance of the US stock market.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171204006121/en/
Copyright Business Wire 2017