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Over the coming weeks, we’ll be posting summaries of economic and market outlook reports from the major firms. First up: Vanguard.

Highlights:

  • World economic growth will remain frustratingly fragile. The global economy will ultimately converge over time toward a more balanced, unlevered, and healthier equilibrium, once the debt-deleveraging cycle in the global private sector is complete.
  • The high-growth “goldilocks” era enjoyed by many emerging markets over the past 15 years is over.
  • Don’t expect a Chinese recession in the near term, but China’s investment slowdown represents the greatest downside risk.
  • The growth outlook for developed markets remains modest, but steady. As a result, the developed economies of the United States and Europe should contribute their highest relative percentage to global growth in nearly two decades.
  • Policymakers are likely to continue struggling to achieve 2% inflation over the medium term.
  • The U.S. Federal Reserve is likely to pursue a “dovish tightening” cycle. There is a high likelihood of an extended pause in interest rates at, say, 1%. That opens the door for balance-sheet normalization and leaves the inflation-adjusted federal funds rate negative through 2017.
  • Elsewhere, further monetary stimulus is highly likely.

Investment outlook

  • Bonds: The return outlook for fixed income remains positive, yet muted.
  • Stocks: After several years of suggesting that low economic growth need not equate to poor equity returns, our medium-run outlook for global equities remains guarded in the 6%–8% range.

Read more here.

Originally published on Advisor.ca

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