The investment year is heading straight to it’s end. In this newsletter we take the chance for a quick review and provide you with our outlook for 2018.
Despite the year is not over yet we take significant double digit gains for equity markets for sure yet. The winner will be high risk segments such as Emerging Markets or NASDAQ, followed by broad US and Japanese stock indices and with European stocks at the end. While risky assets gained above average the volatility has further come down.
Despite the turnaround of the US Fed Funds Rate many US equity markets marked all-time highs. President Trump raised many eyebrows many times by taking unorthodox decisions and making unsuitable statements affecting the US society or even threatening world peace. However, America looks still great. Japan has been on a good path of political continuity and economic breakup. Europe has made virtually no progress in working off its Brexit chaos. UK leaders still refuse to state any number for the divorce bill to be paid to the EU.
On the one hand France has elected a new a promising and ambitious President with a great potential for European leadership. On the other hand Germany has been struggling to from a new government after the recent parliamentary election. The revival for the Euro which can be attributed to a prospective turnaround in ECB monetary policy weighs on EU export activity and thus on European stocks. The fragile cartel of OPEC and mainly Russia has been successful in stabilizing the global crude oil price.
So where do we go from her in 2018? Erwin Lasshofer and his INNOVATIS team believe that markets will have a good start in 2018 before they might reach headwinds. First, the trend is positive and there is reason yet for a turnaround. Sentiment is positive, though not euphoric. The extreme rise of the Bitcoin can be considered a warning sign for a bubble. Yet this still seems to be a small niche and there is no wide spread exuberance to be seen yet. Valuations are high, however interest rates are low and we expect that global central bank will not overreact even if inflation came back. They have made great experience by pushing the pedal for decades and will not stop abruptly without being in serious need.
While low volatility makes investing in broad market investments increasingly difficult Erwin Lasshofer and his INNOVATIS team still find attractive opportunities for structured products in attractive niches. The easiest way for our clients to benefit from our investment picking is the managed account.