Seven themes shaping financial markets and investments
By Kirsten Hastings, 19 May 16
The long term trend of easily securing healthy returns is coming to an end and investors now face the challenge of how
to generate reliable capital growth and income. Aviva Investors has identified seven drivers of long term investment returns. They can be seen by clicking through the following pages.
With headline inflation rates currently negative in the euro zone and Japan, and less than 1% in the UK and US, there has understandably been much talk in recent months about whether central banks will be able to ward off deflation.
However, one of the consequences of the first two themes is that Aviva Investors believes that inflation will gradually return and fears of deflation will eventually be laid to rest.
For a start, much of the fall in inflation over the past year can be explained by the protracted plunge in oil prices. Unless oil prices slump anew, that effect will inevitably begin to diminish. For the time being, oil prices have begun to stabilise, partly because more and more US shale producers have been forced out of business.
Furthermore, the underlying inflation picture has also started to improve. Core inflation in Europe and Japan is around 1% and US core inflation around 2%.
Aviva Investors expects an extended period of loose monetary policy (alongside a stabilisation in commodity prices) will support steady reflation.