Our Mid Year Outlook Report: seven things investors need to know
Citi analysts forecast steady growth and a cautiously optimistic outlook for the second half of the year.
This week we published our Mid-year Outlook report, which takes an in-depth look at the year to date and how the markets may respond over the coming months. Here, we’ve summarised seven key findings and what they mean for you. Click on the headings below for more information on each topic. As ever, if you have any questions, don’t hesitate to contact your relationship manager for more information or to arrange a mid-year portfolio review.
Global growth is slowly picking up, but there are still risks to be aware of
Financial headwinds seen in recent years are diminishing, signalling a modest yet broad pickup in global growth. Europe is experiencing a strong domestic demand and emerging markets are now demonstrating greater resilience. However, political uncertainty, a slump in Chinese activity and a lack of confidence in the current US tax reform could undermine this.
While global interest rates are slowly rising, the UK looks set to remain fixed until 2019
The UK is predicted to keep interest rates steady to stimulate business growth – both for the remainder of 2017 and beyond. If the economy and earnings each rise as expected, corporate bonds and equities should continue to hold their position.
Earnings growth to support equity markets
The UK stock market is expected to grow by 22% as a result of global growth and oil prices. Given the improving economic and earnings outlook, Citi analysts are positive on cyclical sectors, including Energy, Financial and Technology. Cyclical markets such as Japan, Europe and Emerging Markets are set to outperform the US in 2017.
Limited opportunities to be found in bond markets
In European markets, Citigold recommend investing in core financials. We expect them to benefit from the improvements across macro trends, a decrease in political uncertainty, the recovery of earnings/profitability and stronger capital positions.
Political uncertainty still a risk, resulting in potential volatility
Market volatility has remained at a historically low level, but a geopolitical event could still trigger a potentially long-lasting, negative impact. Brexit negotiations are likely to take several years, while North Korea’s situation remains unpredictable. Citi analysts recommend holding a diverse portfolio.
Key commodities offer up varying investment values
The end of the refining maintenance season will see oil in high demand – and with supply tightening since January’s output cuts, Brent prices could be pushed to US$60-65/bbl. Gold has likely peaked in the second quarter though, as only a significant deterioration in the US political and economic situation would improve prices.
USD weakness against EUR could bring short term investment opportunities
The Euro is the currency most likely to benefit from the present weakness of the US dollar. Both the prospering economic fundamentals and improved political stability within the Eurozone have helped it return to a position of strength. GBP remains under pressure from political uncertainty and a growing divergence in interest rate yields between GBP and USD.
Citi Outlook 2017: Reflation, Rotation & Risks
Last year’s UK referendum and US presidential election were surprising and in fact, little short of unforgettable. The results now behind us, what lies on the investment horizon for 2017?
On 2 February in London, our specialists will present Citi’s Outlook for the year ahead. We’ll also be hearing from key fund house partners, who’ll discuss the risks and prospects that lie in store for your investments.
Please register for the event via your Relationship Manager. If you are interested in becoming a Citigold client and would like to register your interest for the event, please call 0207 500 1992 (9AM – 5PM Mon-Fri).
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