Despite the uncertain direction of Brexit-related negotiations, Hill thinks UK companies are still in good shape thanks to a weaker pound, “a less onerous regulatory environment” and additional government support.
China and Russia look cheaper than Brazil and India, Hill contends, and though some investors may be weary of the governance and macroeconomic risks associated with these two markets, she says these may already be fully reflected in the current valuations.
On the fixed income side, 2017 will also be a “year of small steps and careful navigation,” according to the Macquarie team. However, one area they are seeing opportunities in is the credit space.
In particular, portfolio manager Michael Wildstein thinks the trend of “crossover investors” will continue.
“U.S. credit markets experienced massive inflows from a diverse set of buyers in 2016. Quantitative easing (QE) programs like the one that allowed the European Central Bank (ECB) to purchase corporate bonds caused near-zero and even negative rates in some regions. With little compensation from local credit markets, European and Asian investors directed dollars to the U.S.
“This trend of “crossover investors” has turned the U.S. bond landscape into something of an absolute return, any-yield-will-do environment. As such, foreign buyers have even pursued taxable municipal bonds, historically dominated by U.S.-based investors. We anticipate a continuation of that trend in 2017.”
