By Neuberger Berman :
By Joseph V. Amato, President and Chief Investment Officer-Equities; Erik L. Knutzen, CFA, CAIA, Chief Investment Officer-Multi-Asset Class; Brad Tank, Chief Investment Officer-Fixed Income; Anthony D. Tutrone, Global Head of Alternatives
The heads of our four investment platforms identified the key themes they anticipate will guide investment decisions in 2017.
Macro: A sea change for economies and markets
- The rise of nationalistic self-interest continues to upset the world order. After political upheavals in the U.K. and U.S. during 2016, French and German voters will be among those in 2017 to test the persistence of anti-establishment/anti-globalization trends.
- Central bank impact fades. Global central banks appear to have reached an inflection point and will likely drive an increase in interest rates, inflation expectations and market volatility, and a stronger U.S. dollar.
Fixed Income: Normalization resumes
- Real interest rates in the U.S. continue to push higher. Expectations for higher growth and inflation are likely to drive higher Treasury yields and a steeper curve, though we don't anticipate a break from the global rate tether.
- Credit still holds appeal. The credit cycle is mature, but it doesn't appear ready to turn just yet; when it does, more supportive fundamentals are likely to help absorb the impact.
Equities: Back to basics
- Pro-growth Trump administration fuels outperformance of U.S. equities. A more business-friendly environment-characterized by lower taxes, loosened regulations and robust fiscal spending-could provide a tailwind for corporate earnings and stock markets in the U.S.
- Alpha-and active managers able to generate it-may stage a comeback. The removal of artificially low interest rates could result in individual stock performance once again being differentiated by company fundamentals, to the benefit of high-conviction, fundamental investors.
Emerging Markets: Both winners and losers emerge
- Economic orientation counts. In our view, fears that U.S. policy will drag down the entire emerging world are overblown; improved global growth should be generally supportive, though countries likely will be differentiated based on their key economic drivers-manufacturing vs. commodities vs. domestic.
- China risks remain significant. The world's second-largest economy faces a number of ongoing issues-from asset bubbles to currency management-that require a particularly deft touch from Beijing.
Alternatives: Helping narrow the return gap
- Volatility can work for investors. We anticipate that the difference between long-term investor needs and what can be generated from traditional sources of beta is likely to persist, highlighting the value of alternative risk premia and volatility-capture strategies.
- Private debt remains attractive. Despite the potential re-emergence of banks as liquidity providers, it is unlikely that they will rebuild the infrastructure required to compete in similar, less-liquid credit. In addition, increased M&A activity will likely keep the private debt market well stocked with opportunities.
For more detail on these themes, we invite you to continue reading our CIO Roundtable .
This material is provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness or reliability. All information is current as of the date of this material and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Neuberger Berman products and services may not be available in all jurisdictions or to all client types. Investing entails risks, including possible loss of principal. Investments in hedge funds and private equity are speculative and involve a higher degree of risk than more traditional investments. Investments in hedge funds and private equity are intended for sophisticated investors only. Diversification does not guarantee profit or protect against loss in declining markets. Indexes are unmanaged and are not available for direct investment. Past performance is no guarantee of future results.
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