State Street Global Advisors Releases Mid-Year Global Market Outlook: Diverging Markets Call for Skilled Stock Pickers
June 20 2018 - 9:15AM
Business Wire
US Pulls Ahead, Protectionism Remains Biggest Risk
State Street Global Advisors, the asset management business of
State Street Corporation (NYSE: STT), today published its 2018
Mid-Year Global Market Outlook, offering insight into the near-term
future of global markets. The report states that as momentum
falters in markets outside the US, investors will need to look more
carefully for pockets of opportunity. The biggest downside risk
remains protectionism, as trade battles move beyond rhetoric to
retaliatory tariffs. Therefore, a more selective, defensive
approach is recommended for the remainder of 2018.
“As we head into the second half of the year, many of the core
views we expressed last December remain intact,” said Rick
Lacaille, global chief investment officer at State Street Global
Advisors. “Solid growth and contained inflation should continue to
support risk assets, though we now prefer US equities, as Europe
and Japan struggle to match last year’s strong performance. We
continue to find attractive opportunities in emerging markets, both
in equities and local currency debt, though investors need to pick
their spots carefully, as dollar strength, higher oil prices and
geopolitical risks play out differently across the asset class. We
are also taking a selective approach in fixed income, seeking
opportunities in quality names higher up the credit spectrum.”
US Equities Continue to RiseFollowing stellar first
quarter results in which the S&P 500 companies were on track to
post a nearly 25 percent increase in earnings compared to last
year, investors rewarded companies in early May as the US equity
market retraced its year-to-date losses. US tax reform is driving
strong capital investment as companies reporting by the end of
April indicated capital spending increased by 39 percent, the
fastest rate in seven years.1
“Despite concerns about overheating the US economy with
significant fiscal stimulus at a time when unemployment is at a
17-year low,” said Lori Heinel, deputy global chief investment
officer at State Street Global Advisors. “The Federal Reserve seems
ready to let the stimulus take its course and raise rates
gradually, even if the economy overshoots its two percent inflation
target for a time.”
Momentum Wanes in Europe and JapanElsewhere in the
developed world there appear to be signs of faltering growth, with
momentum waning in Europe, and Japan’s more severe labor shortages
constraining its high-water mark for growth. “For every 100
Japanese job seekers, there are 159 vacancies, with unemployment at
2.5 percent, nearly a 25-year low,” said Kevin Anderson, head of
Investments in the Asia Pacific region at State Street Global
Advisors. “The Japanese economy is running out of spare workers,
limiting further growth. Having said that, we continue to find
attractive companies to invest in, as the Bank of Japan keeps
monetary policy loose and company earnings reach all-time
highs.”
Investment ImplicationsGiven the uncertainties
surrounding late cycle markets, State Street believes investors
should review portfolio defenses in the form of hedging, greater
diversification and allocations to uncorrelated assets. Still,
skilled managers can find opportunity in volatility, while seeking
to steer away from the biggest drawdown risks.
To see State Street Global Advisors’ full 2018 Mid-Year Global
Market Outlook content, visit ssga.com/GMO.
About State Street Global Advisors
For four decades, State Street Global Advisors has served the
world’s governments, institutions and financial advisors. With a
rigorous, risk-aware approach built on research, analysis and
market-tested experience, we build from a breadth of active and
index strategies to create cost-effective solutions. As stewards,
we help portfolio companies see that what is fair for people and
sustainable for the planet can deliver long-term performance. And,
as pioneers in index, ETF, and ESG investing, we are always
inventing new ways to invest. As a result, we have become the
world’s third largest asset manager with nearly US $2.73 trillion*
under our care.
*This figure is presented as of March 31, 2018 and includes
approximately $56 billion of assets with respect to SPDR products
for which State Street Global Advisors Funds Distributors, LLC
(SSGA FD) acts solely as the marketing agent. SSGA FD and State
Street Global Advisors are affiliated.
Investing involves risk including the risk of loss of
principal.
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 State Street's express written consent.
State Street Corporation, One Lincoln Street, Boston, MA
02111-2900
2153611.1.1.GBL.RTLExpiration Date 6/31/2019
1 According to CompuStat, FactSet, UBS AG
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State Street CorporationAndrew Hopkins, +1
617-664-2422Ahopkins2@StateStreet.com
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