Going into 2016, investors should expect muted returns and a dip in global growth.
So says John Mauldin, financial expert and one of three speakers at CFA Toronto’s 2015 forecast dinner. The other speakers were Ed Clark, former CEO of TD Bank Group, and Chris Young, managing director at Credit Suisse.
The experts painted a bleak picture for global markets over the next 12 months. They predict volatility will rise, and that economies will experience several more years of recovery and transformation.
And over the next 20 years, says Mauldin, the world will continue to see major demographic, political and economic changes. Those shifts will weigh on equities in the short and mid term, he notes, especially in the U.S., where profits and valuations will fall throughout 2016.
Clark and Young stressed that entrepreneurs and the export sector need additional support. Many young business owners in Canada are failing, says Clark, so the government must find ways to boost their growth and competitiveness over the next year.
Young adds that shareholders and investors are currently worried businesses are prioritizing short-term goals over long-term growth. He notes activist shareholders may become more aggressive by pushing for M&As and stronger balance sheets and for more influence over companies’ operations and governance.
For more economic tips, read the following articles.
Live tweets from CFA Toronto’s Annual Forecast Dinner
I’ve arrived at the 2015 @CFAToronto annual forecast dinner! Looking forward to a night of good food and insights. Speakers tonight are: Ed Clark, former CEO of TD; Chris Young, managing director for Credit Suisse; and John Mauldin of Mauldin Economics.
And here’s Ed Clark! He’s going to talk about how to build a framework for sustainable economic growth. The key, says Clark, is to support working and middle-class ppl, while not favouring the top of the economic pyramid.
On a global scale, Canada needs to be a leader in service exports. And, needs to turn more small businesses into mid-sized businesses: Clark. #CFAForecast
The auto sector is still important for us, says Clark. But it’s not competitive right now and has to be innovative #CFAForecast Clean tech is one area where innovation is working, adds Clark. #technology
The room was asked how the Ontario economy will perform this year: 43% say similar. #CFAForecast
On activist shareholders
Activist investors are becoming more aggressive, says Young. More are breaking up companies. He adds that some investors worry that companies are looking after the needs of activist investors (dividends) more than long-term growth (R&D investing). #CFAForecast
Activist investors want four main things: M&As, strong balance sheets, and control when it comes to both operations and governance. For more on shareholder activism, read: Profit from shareholder activism
When PMs are frustrated with a company’s performance, they can contact activist shareholders, suggests Young. #CFAForecast
In many cases in the U.S., activist shareholders get audiences with senior management more quickly than other long-time shareholders. And, these activists will increasingly pressure companies for say on pay. Plus, more shareholder activism will come to Canada. #CFAForecast
Does shareholder activism help generate alpha? What are your thoughts? 62% of CFAs think it does! #CFAForecast
On the global economy
There will be no hard landing for #China, says Mauldin. Stock market underperforming, but China’s economy has clear growth goal. He predicts manufacturing will continue to fall in China, but the services economy will lead the way.
Still, 71% of the event attendees call for a hard landing in China over a recession in Europe (29%) for 2016. But, says Mauldin, “Europe is a lost cause and will muddle through in 2016.” #economy #CFAForecast
The bull market for #bonds isn’t over in U.S., says Mauldin. However, markets will still be very volatile. And there could be a 20% drop for the U.S. market due to valuations being high and profits being down. So, U.S. will sit between 1.5% and 2% over next year.
As such, we’ll have to be more creative in how we find yield. Diversification of trading strategies is key versus diversification of holdings. #CFAForecast