22nd December 2010
Schroders Outlook pieces - 2011 series
As the end of the year draws near, various specialists at Schroders discuss their outlooks for 2011. Please click here to read the articles.
Outlook pieces from our 2011 series
2011: A year in the global economy– Keith Wade & Azad Zangana
- Austerity will be a key theme for 2011, with the UK and peripheral Europe being the main focus
- Any benefit from QE2 to the US is largely through the fall in the dollar
- China has also benefitted from this, but will struggle to prevent liquidity from spilling over into asset bubbles and inflation
- The recovery, albeit a weak one, will continue, but low interest rates will force investors to continue seeking yield
2011: A year in global equities– Virginie Maisonneuve
- This year has been one of transition to the “new normal” world.
- Looking ahead, the outlook for global equities is strong, although short term volatility is to be expected.
- Structural adjustments are leading to a new level of equilibrium in the current bipolar world: will the medicine for the ageing developed world become a poison for emerging markets?
- The competitive forces in 2011 will be emerging markets’ appreciating currencies and an increase in the relative competitiveness of the US.
2011: A year in global high yield– Wes Sparks
- Despite another strong year for global high yield, it’s difficult to see a bubble in an area where valuations appear fully justified
- The yield premium available over government bonds remains attractive, particularly given a falling default rate
- High yield company management teams remain focused on balance sheet repair, ensuring that we enter 2011 with a trend that is very much in favour of creditors
- Record issuance in 2010 has been directed at reducing refinancing risks and has been well-received. This doesn’t look likely to change in 2011, given the backdrop of extremely accommodative monetary policy
2011: A year in emerging markets– Allan Conway
- Emerging nations will continue to be the engine of global economic growth in 2011
- The second round of quantitative easing means that more capital is likely to flow into emerging market assets
- The balance of economic power continues to shift from the developed world to the emerging markets
- Institutional investors increasingly regard emerging markets as a strategic rather than tactical asset class; this trend should continue in an environment where returns on developed world assets are likely to remain low
- Emerging markets are attractively valued and offer strong earnings growth
2011: A year in Europe– Rory Bateman
- Growth rates and economic indicators for core Europe have been strong and we expect the trend to continue. Peripheral Europe, however, faces a period of certainty.
- Profits and cashflows are strong for core European companies, enabling greater returns to shareholders and boosting M&A activity.
- European equity valuations are attractive relative to history, other equity markets and other asset classes.
- We believe 2011 will be good for equities and now is a great time to invest in Europe.
- It’s worth noting that Spain, Portugal, Ireland and Greece represent only 17% of total Euro area GDP
2011: A year in Asia ex Japan– King Fuei Lee
- The developed world is unlikely to provide the impetus for growth in Asia
- Competing internal and external forces will mean that many Asian markets will trend sideways in 2011
- As markets gravitate towards fundamentals, a specialised understanding of the market will become increasingly vital
- Despite tough trading conditions, about under half the market still looks attractive
2011: A year in the UK – Richard Buxton
- Corporate profits have been the bright spot of the recovery
- UK stocks remain relatively undervalued and have the potential to rally significantly in 2011
- We will not rollover into a double-dip. The private sector will absorb public sector job losses
2011: A year in the US – Jonathan Armitage
- US corporate profitability remains healthy and strong free cash flow generation has led to a revival in M&A activity
- Consumer risks remain but the drag from housing should begin to ease in 2011
- US equity valuations remain attractive relative to their long-term average and there are interesting opportunities in energy, industrials and diversified financials
2011: A year in Japan – Shogo Maeda
- Economic recovery remains on track, but slow
- However, decisive action from the government and Bank of Japan could mean investors change their mind about this cheap market before economic recovery is complet
- Japan’s exports are benefiting from Chinese and other emerging market demand
- Japan’s corporate sector has been resilient in the economic turndown, and profitability is picking up
More coming soon:
2011: A year in Asian bonds
2011: A year in global property
2011: A year in investment grade credit
2011: A year in European government bonds
2011: A year in multi asset
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