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.
The sharp fall in oil prices in 2014 and 2015 prompted concern about the global economic outlook. That in turn affected equities and other asset classes as investors worried about the earnings of energy companies and miners, as well as banks exposed to the commodity sector’s debts.
However, falling oil prices were not a harbinger of global economic weakness. An increase in the supply of oil rather than a lack of global demand – which was actually stronger in 2015 than the previous year – explained the fall.
While it is true that the break-even price of oil has fallen in recent years due to technological advances, prices are now close to the marginal cost of production. That suggests prices should start to stabilise, although a further significant recovery is not expected.
As for other commodities, Aviva Investors believes there will be a dispersion of performance. The recent reversal in course taken by China has lifted the price of various industrial metals such as iron ore and copper.
This revival, however, is not expected to be sustainable in the longer term.
As for other commodities, in instances where China’s share of global demand is smaller, Aviva Investors is less bearish.