Northern Trust’s Five-Year Investment Outlook: Amid Steady Global Growth, Stocks Remain Attractive Despite Elevated Valuati...
September 13 2017 - 8:00AM
Business Wire
The global economy will experience 2.4% real average annualized
growth over the next five years, according to Northern Trust’s
Capital Market Assumptions five-year investment outlook, a report
that informs the investment decisions for the $1 trillion managed
by the firm. While acknowledging that equity valuations are high in
developed markets, the forecast projects that steady economic
growth along with low inflation will keep stocks attractive since
these conditions are conducive to strong earnings and support high
valuations. The highest regional average annualized return is
forecast for emerging markets, at 8.4%, followed by: 7.2% for
Europe; 6.6% for the U.K.; 6.0% for Japan; and 5.9% for the
U.S.
The outlook does not foresee a bond bubble given the firm’s
expectation that interest rates will remain low and increase
gradually and modestly, as well as less than general market
expectations reported by Bloomberg. Northern Trust expects rates on
3-month bonds from the U.S., Europe, Japan, and the U.K., to
increase to a range of 0.0% (Japan) to 2.1% (U.S.). The firm’s
10-year bond expectation ranges from 0.5% (Japan) to 3.0%
(U.S.).
The complete forecast is based on six investment themes
identified by Northern Trust. One of them, “Waiting for Monetary
Godot,” refers to a widely held belief among investors that
monetary policy will normalize as global growth remains subdued and
inflation stays below central bank targets. However, Northern Trust
finds this outcome highly unlikely. “We may never see central banks
return to traditional policies and don’t expect a return to
pre-financial crisis levels over our forecast horizon,” said
Northern Trust Chief Investment Officer Bob Browne. “A successful
unwinding of huge central bank balance sheets, which is likely to
remain larger than historical levels, will be the focus.”
In citing Brexit and the U.S. presidential election as examples
of “populist earthquakes” cited in its “Popular Catharsis” theme,
the forecast notes that such events will not derail another of the
six themes – “Entrenched Growth” over the next five years. “The
rise of global populism has not dramatically changed the global
economic outlook,” Northern Trust Chief Investment Strategist Jim
McDonald said. “During this political and economic transition
investors will show patience and reward those leaders who drive
change.”
Wayne Bowers, CIO and CEO for Northern Trust Asset Management in
Europe, Middle East and Africa said the report’s theme of
“Entrenched (Global) Growth” and relative stability “is based on
demand being constrained by natural regulators such as high debt
burdens, aging developed market populations and transitioning
emerging market economies. These factors, along with regulatory
relief and persistent low inflation, will continue to allow easy
monetary policy, and stop global markets from overheating.”
Northern Trust’s capital market assumptions are the firm’s
forward-looking, historically aware forecasts for global economic
activity and financial market returns. These forecasts drive its
five-year asset class return expectations and asset allocation
decisions.
Developed by the firm’s top investment professionals, this
framework serves as the foundation for the solutions the firm
provides to professional and individual investors worldwide.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider
of wealth management, asset servicing, asset management and banking
to corporations, institutions, affluent families and individuals.
Founded in Chicago in 1889, Northern Trust has offices in the
United States in 19 states and Washington, D.C., and 22
international locations in Canada, Europe, the Middle East and the
Asia-Pacific region. As of June 30, 2017, Northern Trust had assets
under custody of US$7.4 trillion, and assets under management of
US$1.03 trillion. For more than 125 years, Northern Trust has
earned distinction as an industry leader for exceptional service,
financial expertise, integrity and innovation. Visit
northerntrust.com or follow us on Twitter @NorthernTrust.
Northern Trust Corporation, Head Office: 50 South La Salle
Street, Chicago, Illinois 60603 U.S.A., incorporated with limited
liability in the U.S. Global legal and regulatory information can
be found at https://www.northerntrust.com/disclosures.
About Northern Trust Asset Management
Northern Trust Asset Management is a leading global asset
management firm serving institutional and individual investors in
29 countries. Our robust investment capabilities span all markets
and asset classes, from passive and risk-factor to fundamental
active, multi-asset class and multi-manager strategies, delivered
in multiple vehicles. As of June 30, 2017, Northern Trust has $1.03
trillion in total assets under management. For more information,
please visit our website or follow us on Twitter @NTInvest.
Northern Trust Asset Management comprises Northern Trust
Investments, Inc., Northern Trust Global Investments Limited,
Northern Trust Global Investments Japan, K.K., NT Global Advisors,
Inc. and investment personnel of The Northern Trust Company of Hong
Kong Limited and The Northern Trust Company.
IMPORTANT INFORMATION. This material is directed to
eligible counterparties and professional clients only and should
not be relied upon by retail investors. The information in this
material reflects prevailing market conditions and our judgment as
of this date, which are subject to change. Past performance is
no guarantee of future results. All material has been obtained
from sources believed to be reliable, but the accuracy,
completeness and interpretation cannot be guaranteed. The
information does not constitute investment advice or a
recommendation to buy or sell any security and is subject to change
without notice.
For important information relating to hypothetical returns and
model forecasts please refer to the disclosure page
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Northern TrustEurope, Middle East, Africa &
Asia-Pacific Contact:Camilla Greene+44 (0) 207 982
2176Camilla_Greene@ntrs.comorNorth America Contact:Tom Pinto+1 212
339 7288Tom_Pinto@ntrs.com
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