The global outlook is stronger for 2017 but with new opportunities come new risks for investors according to Kleinwort Hambros’ Alan Mudie, Xavier Denis and Mouhammed Choukeir, who spoke at an outlook conference this week.
The US will remain the fastest-growing developed economy next year as the government becomes more supportive of growth and the dollar should remain strong, while the eurozone should see above-potential growth in GDP, the trio said.
Despite the expectation of growth, valuations could be pressured by rising interest rates and dollar strength, they added.
In Kleinwort’s investment strategy for 2017, the firm said: “The shifting gears in the policy mix will bring new opportunities but also new risks for investors.
“More expansionary fiscal policy would boost growth but valuations could be pressured by rising interest rates and dollar strength. In this context, broad diversification across assets and long-term themes remains advisable.”
Kleinwort Hambros expects investment grade and high yield debt to outperform US treasuries and will favour shorter maturities. The firm also favours banks to non-financial corporate bonds as banks have improved their capital ratios over the last few years.
However, in the UK they see a difficult year ahead for the Bank of England with a “grim” economic outlook as business confidence falters despite a boost in imported inflation as sterling drops.