State Street Global Advisors, the asset management arm of State
Street Corporation (NYSE: STT), today released its Global Market
Outlook for 2018 – Step Forward, Look Both Ways – predicting that
the coming year will be supportive of risk assets. However, the
maturity of the growth cycle and a number of structural
uncertainties will warrant a degree of caution.
State Street Global Advisors forecasts more evenly distributed
global growth, which it expects to return to its historical trend
rate of 3.7 percent in 2018, supporting company earnings and
pushing equity markets even higher. The firm sees the best
opportunities further down the cap spectrum within the US, and
views developed markets such as Japan and Europe as particularly
attractive.
“The slow but steady improvement in global growth, coupled with
modest inflation, provides the kind of macro environment that can
continue to lift markets higher,” said Rick Lacaille, global chief
investment officer for State Street Global Advisors. “Valuations,
although extended in some sectors, remain below fair value at
current interest rate levels. Japan is arguably the most attractive
developed market, given relatively low interest rates and a weak
currency.”
The firm also expects that the ongoing move away from
extraordinary monetary policy accommodation, alongside evidence of
lower cross-asset class correlations, could be more conducive for
active equity managers.
“Historically low interest rates and policy-driven liquidity
following the global financial crisis have challenged active
managers through higher correlations and lower volatility,” said
Lori Heinel, deputy global CIO for State Street Global Advisors.
“That backdrop is changing. However, careful consideration of
where, when and how to go active is essential in order to strike
the right balance alongside smart beta and core index
exposures.”
State Street Global Advisors also sees more opportunity in bond
markets. While further rate rises from the US Federal Reserve (Fed)
and European Central Bank (ECB) are in store despite low inflation,
the firm expects rates to stay anchored at a relatively low
level.
“While we are unlikely to see the bond bull to keep charging in
2018, we do think the bears will probably be proven wrong for
another year, even as the Fed is expected to raise rates and other
major central banks begin tapering their accommodative policy. That
said, investors need to balance duration and credit risks
carefully. While emerging market debt valuations have become less
attractive, a tilt towards quality can continue to deliver
results,” added Lacaille.
State Street Global Advisors tempers its outlook with a degree
of caution recognizing that, eight years into the growth cycle,
some investors are increasingly wary of the potential for a
pullback.
“While volatility remains low, the SKEW Index continues to be
elevated, suggesting investors are worried about a low-probability,
high-impact market correction. We are at that point in the cycle
when investors should review the tail risk protection in their
portfolios. The fundamental backdrop remains favorable, however. We
think investors should look both ways. They should take a more
cautious and risk-aware stance as they step forward to make the
most of the opportunities that synchronized global growth will
likely offer in 2018,” Heinel concluded.
To view the full Global Market Outlook, click here.
About State Street Global Advisors
For nearly four decades, State Street Global Advisors has been
committed to helping our clients, and those who rely on them,
achieve their investment objectives. We partner with many of the
world’s largest, most sophisticated investors and financial
intermediaries to help them reach their goals through a rigorous,
research-driven investment process spanning both indexing and
active disciplines. With trillions* in assets, our scale and global
reach offer clients unrivaled access to markets, geographies and
asset classes, and allow us to deliver thoughtful insights and
innovative solutions.
State Street Global Advisors is the investment management arm of
State Street Corporation.
*Assets under management were $2.67 trillion as of September 30,
2017. AUM reflects approx. $36 billion (as of September 30, 2017)
with respect to which State Street Global Advisors Funds
Distributors, LLC (SSGA FD) serves as marketing agent; SSGA FD and
State Street Global Advisors are affiliated. Please note that AUM
totals are unaudited.
Important Information:
Investing involves risk including the risk of loss of
principal.
The information provided does not constitute investment advice
and it should not be relied on as such.
All information has been obtained from sources believed to be
reliable, but its accuracy is not guaranteed.
There is no representation or warranty as to the current
accuracy, reliability or completeness of, nor liability for,
decisions based on such information and it should not be relied on
as such.
The whole or any part of this work may not be reproduced, copied
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This document may contain certain statements deemed to be
forward-looking statements. Please note that any such statements
are not guarantees of any future performance and that actual
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The information provided does not constitute investment advice
as such term is defined under the Markets in Financial Instruments
Directive (2004/39/EC) or applicable Swiss regulation and it should
not be relied on as such. It should not be considered a
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There is no representation or warranty as to the accuracy of the
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pronounced for longer-term securities. Any fixed income security
sold or redeemed prior to maturity may be subject to a substantial
gain or loss.
CORP-3501Expiration Date: 12/31/2018
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version on businesswire.com: http://www.businesswire.com/news/home/20171206005780/en/
State Street CorporationAndrew Hopkins,
617-664-2422Ahopkins2@statestreet.com
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