SSgA Bullish on Growth in 2014; Uncovers Diversification and
Return Opportunities
State Street Global Advisors (SSgA), the asset management
business of State Street Corporation has announced its global
outlook for 2014, highlighting five key investment themes that
investors should consider as they position their portfolios for the
year ahead.
Global Outlook:
- Recovery will become more broad-based
and self-sustaining in nature next year. The US looks set to enjoy
accelerating growth. Europe’s recovery may still be fragile but
economic activity levels have bounced off particularly low levels
and the region is poised for modest growth
- Emerging markets typically benefit most
from a global recovery and their long-term outlook remains positive
despite a turbulent 2013. In 2014, emerging markets will be
impacted by conflicting forces: a strengthening global economy on
one hand but a strengthening dollar on the other. Valuations,
however, are not demanding and expectations are low.
- In China, the ‘Chinese Dream’
initiative to reshape the economy by beginning the shift from an
export-driven model is a positive development. SSgA anticipates
growth of about 7.5% in 2014, but risks still persist.
- Although the prospect of extreme risk
events have diminished, there is still reason for caution as there
are many complex interlinking parts and growth remains sluggish.
Stress points remain and the normalization of monetary policy could
prove challenging.
Investment Themes:
Fixed Income in Transition
- For the first time in years, SSgA
expects that monetary policies will begin to diverge, although
major country administered rates will likely remain unchanged. The
US Federal Reserve is expected to begin a tightening cycle by
tapering its asset purchases, which could in turn signal the
beginning of a transition to more normal rates for those economies
that are performing well.
- However, concerns about rising rates
will boost demand for certain fixed income assets favouring credit
over duration, such as high yield and loans, absolute return to
cash benchmarks, and short duration corporate and floating rate
notes.
Eurozone Recovery
- Eurozone growth is particularly
favourable to European peripheral debt. SSgA expects that there
will be rallies in peripheral stocks and that small caps and high
yield should continue to perform well. SSgA is positive on the
outlook for Spanish and Italian equities.
- The UK is set to be the best G10
performer but may experience inflationary pressures. SSgA is upbeat
on the outlook for UK corporate bonds and the UK financial
sector.
Emerging Markets
- Current bond and equity valuations
offer good upside for 2014, but investors will need to be
selective. Emerging Markets are sensitive to policy makers’
decisions, at home and abroad and countries that fail to address
reforms adequately are less deserving of investor attention.
- While the period of 10% per annum
growth may be in the past for China, it is still set to displace
the US as the world’s biggest economy by 2030.
Over-valued Safe Havens
- Because a path to elimination of
Federal Reserve asset purchases is now on the table, and economic
prospects appear consistent with tapering, government bonds seem to
have lost the safe-haven appeal that served them well during 2011
and 2012.
- The broad lack of value in sovereign
paper extends to other fixed income segments, narrowing further the
options for yield-seeking investors. Also as central bank policies
have progressively stripped return from short-term instruments,
cash has come to offer very little compensation for a risk-averse
posture as well.
The Changing Face of Correlations
- The market environment of 2014
continues to pose a challenge for asset allocators to build
portfolios with the proper level of diversification. A more nimble
approach such as tactical asset allocation will be more appropriate
to be able to adjust allocations quickly.
- SSgA favours short biased strategies,
managed futures, real estate and cash as diversifiers with stable
low correlations for 2014.
Commenting on the global market outlook for 2014, Rick Lacaille,
global chief investment officer at SSgA said, “If stabilisation was
the message in 2013, recovery is the watchword for 2014. While we
are not discounting potential risks, like government and central
bank policy changes or geopolitical issues that could disrupt the
growth story, there are plenty of positives to catch the investor’s
eye for 2014.”
About State Street Global Advisors
State Street Global Advisors (SSgA) is a global leader in asset
management. The firm is relied on by sophisticated investors
worldwide for its disciplined investment process, powerful global
investment platform and access to every major asset class,
capitalization range and style. SSgA is the asset management
business of State Street Corporation, one of the world’s leading
providers of financial services to institutional investors.
Important Information
Investing involves risk including the risk of loss of
principal.
The views expressed in this material are the views of State
Street Global Advisors through the period ended 11/11/14 and are
subject to change based on market and other conditions.
Risk associated with equity investing include stock values which
may fluctuate in response to the activities of individual companies
and general market and economic conditions.
The information provided does not constitute investment advice
and it should not be relied on as such. It should not be considered
a solicitation to buy or an offer to sell a security. It does not
take into account any investor's particular investment objectives,
strategies, tax status or investment horizon. You should consult
your tax and financial advisor. All material has been obtained from
sources believed to be reliable. There is no representation or
warranty as to the accuracy of the information and State Street
shall have no liability for decisions based on such
information.
The whole or any part of this work may not be reproduced, copied
or transmitted or any of its contents disclosed to third parties
without SSgA's express written consent.
Australia: State Street Global Advisors, Australia, Limited (ABN
42 003 914 225) is the holder of an Australian Financial Services
Licence (AFSL Number 238276). Registered office: Level 17, 420
George Street, Sydney, NSW 2000, Australia Telephone: 612 9240-7600
o Facsimile: 612 9240-7611
Belgium: State Street Global Advisors Belgium, Office Park
Nysdam, 92 Avenue Reine Astrid, B-1310 La Hulpe, Belgium.
Telephone: 32 2 663 2036, Facsimile: 32 2 672 2077. SSgA Belgium is
a branch office of State Street Global Advisors Limited. State
Street Global Advisors Limited is authorised and regulated by the
Financial Conduct Authority in the United Kingdom.
Canada: State Street Global Advisors, Ltd., 770 Sherbrooke
Street West,Suite 1200 Montreal, Quebec; H3A 1G130 Adelaide Street
East Suite 500, Toronto, Ontario M5C 3G6.
Dubai: State Street Bank and Trust Company (Representative
Office), Boulevard Plaza 1, 17th Floor, Office 1703 Near Dubai Mall
& Burj Khalifa, P.O Box 26838, Dubai, United Arab Emirates.
Telephone: 971 (0)4-4372800, Facsimile: 971 (0)4-4372818.
France: State Street Global Advisors France. Authorised and
regulated by the Autorité des Marchés Financiers. Registered with
the Register of Commerce and Companies of Nanterre under the number
412 052 680. Registered office: Immeuble Défense Plaza, 23-25 rue
Delariviére-Lefoullon, 92064 Paris La Défense Cedex, France.
Telephone: ( 33) 1 44 45 40 00. Facsimile: ( 33) 1 44 45 41 92.
Germany: State Street Global Advisors GmbH, Brienner Strasse 59,
D-80333 Munich. Telephone 49 (0)89-55878-400. Facsimile 49
(0)89-55878-440.
Hong Kong: State Street Global Advisors Asia Limited, 68/F, Two
International Finance Centre, 8 Finance Street, Central, Hong Kong
o Telephone: 852 2103-0288 o Facsimile: 852 2103-0200
Japan: State Street Global Advisors, Japan, 9-7-1 Akasaka,
Minato-ku, Tokyo Telephone 813-4530-7380 Financial Instruments
Business Operator, Kanto Local Financial Bureau (Kinsho #345) Japan
Securities Investment Advisers Association, Investment Trust
Association, Japan Securities Dealers' Association
Ireland: State Street Global Advisors Ireland Limited is
regulated by the Central Bank of Ireland. Incorporated and
registered in Ireland at Two Park Place, Upper Hatch Street, Dublin
2. Registered number 145221. Member of the Irish Association of
Investment Managers.
Italy: State Street Global Advisors Italy, Sede Secondaria di
Milano - Via dei Bossi, 4 20121 Milan, Italy. Telephone: 39 02
32066 100, Facsimile: 39 02 32066 155. SSgA Italy is a branch
office of State Street Global Advisors Limited. State Street Global
Advisors Limited is authorised and regulated by the Financial
Conduct Authority in the United Kingdom.
Netherlands: State Street Global Advisors Netherlands, Adam
Smith Building, Thomas Malthusstraat 1-3, 1066 JR Amsterdam,
Netherlands. Telephone: 31 20 7085600, Facsimile 31 20 7085601.
SSgA Netherlands is a branch office of State Street Global Advisors
Limited. State Street Global Advisors Limited is authorised and
regulated by the Financial Conduct Authority in the United
Kingdom.
Singapore: State Street Global Advisors Singapore Limited, 168,
Robinson Road, #33-01 Capital Tower, Singapore 068912 (Company Reg.
No: 200002719D) o Telephone: 65 6826-7500 o Facsimile: 65
6826-7501
Switzerland: State Street Global Advisors AG, Beethovenstr. 19,
CH-8027 Zurich. Telephone 41 (0)44 245 70 00. Facsimile Fax: 41
(0)44 245 70 16.
United Kingdom: United Kingdom: State Street Global Advisors
Limited. Authorised and regulated by the Financial Conduct
Authority. Registered in England. Registered No. 2509928. VAT No.
5776591 81. Registered office: 20 Churchill Place, Canary Wharf,
London, E14 5HJ. Telephone: 020 3395 6000. Facsimile: 020 3395
6350.
United States: State Street Global Advisors, One Lincoln Street,
Boston, MA 02111-2900
Web: www.ssga.com
2013 State Street Corporation - All Rights Reserved
Expiration Date: 12/04/14
IBGE-0958
State Street CorporationElizabeth Bartlett, + 1
617-662-2903www.statestreet.com@StateStreet
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