14 financial experts give their top themes for 2016
With the holiday season fast approaching, and the inevitable winter slow-down in market activity, many of the world’s top finance experts have started looking into the crystal ball for 2016. 14 of them shared their predictions with Bloomberg – here’s a brief rundown of what they had to say:
First off, Ruchir Sharma of Morgan Stanley Investment Management isn’t exactly confident. “We’re just one big shock away from a global downturn”, he says, adding that China’s heavy debt, excessive investment and population decline are a recipe for potential disaster.
Dan Fuss, vice chairman at Loomise Sayles & Co, says bond portfolios will face a tough 2016 in the current geopolitical climate. He recommends a mix of Treasury bonds, investment-grade corporates and high-yield debt which “has the best value relative to stocks”.
Fundstrat Global Advisors’ Thomas J. Lee believes equities will be the name of the game in 2016. “Banks will benefit from the Fed tightening and will boost their returns on equity as the economy expands.”
Jim Caron at Morgan Stanley believes inflation risk premia will make a return to the markets, providing “upward lift for 30-year Treasury yields, possibly towards 3.75%”.
Continued excitement around the funding of startups has Alan Patricof of Greycroft Partners concerned. “There are just too many at the moment, and there isn’t enough money to sustain them.”
Russ Koesterich at BlackRock is looking forward to incremental rates rises from Janet Yellen, though he believes “the Fed is going to be less important in 2016”.
The reductions of sovereign wealth funds in oil producing states such as Norway and Saudi Arabia has Barbara Byrne of Barclays Capital predicting a recovery in resource prices, particularly a more stable oil price environment.
Deutsche Bank’s Joseph LaVorgna isn’t picking prospects for any serious growth in 2016, saying the message is for “more of the same,” with some optimism possible after the US presidential election.
Mark Haefele of UBS Wealth Management believes an aging world population will drive healthcare investment. “Demand for cancer treatments will only increase, yet the supply of capital for the riskiest stages of development is limited.”
Goldman Sachs Asset Management managing director Katie Koch is also concerned about the aging population, but says it brings with it a rise in spending from millennials. “Their spending trajectory is getting steeper and increasing compared to baby boomers.”
It’s been a rocky 2015 for China, to say the least, but Yang Zhao of Nomura Holdings believes the red dragon will be alright. “The labour market remains largely balanced; even with 5.8% GDP growth, the economy will create jobs, especially in the labour-intensive services sector.”
In South America, Tulio Vera of JP Morgan is looking Argentina as a “ray of sunshine”. He sees the Brazilian investment landscape as less than certain, but Mexico bouncing off a continued US recovery.
Closer to home, the refugee crisis in Europe has Rebecca Patterson of Bessemer Trust concerned, saying the Paris attacks have increased the risk that the crisis could result in major political or policy changes. “Either could weigh on sentiment around European growth and corporate profits”.
And finally, Erik Nielsen of UniCredit is looking for a bit of transatlantic rivalry in 2016, expecting “further divergence between the Fed and the ECB, with the former hiking rates a couple of times … and the latter expanding its balance sheet more than it has presently announced.”