Why being first adopters may not be the best strategy for tect adoption

Highlights

  • The strongest economic backdrop should linit the risks stemming from the 4 March election.
  • Our assessment is that the Italian election is likely to have limited impact on global markets. Hence, we remain overweight European equities.

Viewpoint

Market Watch: Investment Insights

Market Watch: Global Overview

Investors have enjoyed stellar market returns for 2017, but stretched valuations and a challenging macroeconomic backdrop suggest that the wids of change are picking up.

Monetary tightening is broadening out from the US to other developed econnomies. This represents a significant change from the loose policy environment in the past decade. We view this positively as it reflects the normalisation of world economy; but it may also create a more cha... allenging and unpredictable investment environment for 2018, something that we shouldn't ignore.

By all accounts, 2018 will be a turning point, as central banks reverse their QE policy for the first time in a decade. This means the "easy" money of yesteryers - and the strong returns frontloaded by central banks' easy policies - may soon become a thing of a past.

This further compounded by the fact that inflation is currently under-priced by markets. If inflation surprices on the upside, the pace of monetary tightening could accelerate further. Investment returns will become more uncertain and harder to come by, and we think the overarching strategy to navigate the choppy winds ahead will centre on portfolio risk management in 2018.
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