Predicting the U.S. gross domestic product ranging from 2.3% to 2.9%, a Standard & Poor's 500 total return ranging from 2% to 6% and an MSCI EAFE total return ranging from -12% to 10%, institutional investment strategists see three main drivers in the global outlook for the capital markets and economy for 2017.
Read the forecasts and expectations of P&I's panel of experts here.
Looming the largest are:
- the election of Donald Trump as U.S. president in November and uncertainty, optimism and obstacles facing the new administration;
- heightened political risks in Europe, incited by populist fever set off by the U.K.'s June referendum to leave the European Union, amplified by the Italian constitutional referendum in December and building up with elections in the Netherlands in March, France in April and Germany later in the year; and
- currency turmoil, from sustainability of the euro to the strengthening dollar.
“Trump has to be the biggest source of risk for markets,” said Craig Mackenzie, chief investment strategist at Aberdeen Asset Management PLC, Edinburgh. “We really don't have much of an idea what kind of president he is going to be.”
“There is a huge range of possible outcomes over the next year or so, a much wider range than would normally be the case” with a new administration, Mr. Mackenzie said. “We have certainly become more positive about the U.S. but ... we think that the secular stagnation story is still largely in place.”
Donald G.M. Coxe, chairman, Coxe Advisors LLC, Chicago, said: “Investors are anticipating all the good things that are going to come from this new (Trump) government, but getting a lot of this stuff done is going to be painfully hard and going to take longer” than thought.
“There is a degree of volatility and emotion,” Mr. Coxe said. ”It was better for investors that Trump win the election, but this was an astounding conversion to occur in a short space of time.”
Expressing more certainty, Krishna Memani, chief investment officer and head of fixed income of OppenheimerFunds Inc. and its institutional unit, OFI Global Asset Management Inc., New York, looks for Mr. Trump “to implement a set of fiscal expansion policies that lead to somewhat higher nominal and real GDP growth at least for the first half of 2017 (and) to better return on equities, pressure on bonds, slightly higher inflation and a strong dollar.”