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.
Although Aviva Investors believes economic growth will pick up for the reasons already outlined, the company remains concerned about the amount of debt that has built up around the world, which in some cases is arguably unsustainably high given the low current rates of inflation and economic growth.
However, differentiation needs to be made.
While private sector balance sheets are much improved in developed countries, such as the US and to some extent the UK, public sector debt has ballooned.
But given that central banks own much of that debt and little expectectation that government bonds will be sold back onto the market, the debt burden in these economies is not as much of a problem as the headline levels imply.
The picture in emerging countries is of greater concern. While debt ratios may be lower, interest rates are much higher and more volatile than in the developed world. As a result, these countries cannot necessarily maintain the same level of debt as advanced nations.
Increasingly, investors will have to focus again on the economic fundamentals of each issuer rather than apparently attractive yields.