MARKET OUTLOOK

Midyear Outlook 2017

iShares EMEA Head of Investment Strategy July 2017

The global expansion is chugging along, with an improved eurozone outlook in particular, deflation fears and near-term political risks look to have faded and financial market volatility is subdued. We believe this provides a fertile ground for further modest gains in risk assets such as equities.

Key points

  • Sustained expansion: The current US economic cycle has been unusually long, sparking market fears that it is ready to die of old age. We have a different take.
  • Rethinking returns: We expect long-term bond yields to rise gradually over the next five years but stay well below historical averages. In a low rate world, we believe equities may be cheaper than they look - at least in relative to bonds.
  • Rethinking risk: Financial market volatility is low. The history of volatility is one of long stretches of calm punctuated by brief moments of crisis. Today's lo-volatility regime may persist for longer than many expect.