As the global economy is gradually rebounding, with the direction pointing towards reflation for some major economies, Standard Chartered Bank has advised investors to manage downside risks, with preference for equities and corporate bonds.
Emerging Market bonds, preferably the Asian dollar-denominated bonds, are expected to outperform those of the U.S. and Europe on the back of a modestly weaker dollar and relatively attractive yields.
The bank in its Wealth Management Advisory Outlook 2018, predicted a continued gradual expansion of output, combining a modest stronger economic growth with rising inflation.
According to the Chief Investment Strategist at Standard Chartered Bank, Steve Brice, “growth accelerated in 2017, but inflation did not. We believe a gradual ‘heating up’ of the global economy is likely in 2018, with robust economic growth and inflation finally increasing.
“Our Outlook 2018 report is designed to help our clients navigate these market conditions. Economic growth continues to simmer. The ‘Goldilocks’ environment- not too hot, not too cold, of strong growth and limited inflation is likely to extend into the early part of 2018.
“Continued earnings’ growth means equities and corporate bonds have room to extend gains going into 2018. Inflation is the main risk to this ‘Goldilocks’ scenario, especially further into 2018.
“A larger-than-expected rise in inflation would mean the environment could turn too hot, forcing central banks to tighten policy more aggressively than markets currently expect,” he said.