State Street Global Advisors (SSGA) chief investment officer Rick Lacaille says despite the company’s subdued economic forecast, there are opportunities for investors on the hunt for yield.
“With growth markets, we’re not expecting economic growth to be sparkling this year but there will be enough at the company level for selective investors to find growth within their portfolio,” Mr Lacaille told SSGA’s Global Market Outlook 2017
“Although we’re late in the credit cycle, we do think there are opportunities in credit and other asset classes to build yield.
“Don’t go for the safe havens. I think economic growth won’t be great this year but it’ll be enough.”
Instead of relying on a defensive strategy, Mr Lacaille urged investors to seek out growth opportunities while remaining aware that last year’s volatility will likely carry over to 2017.
“I think particularly avoid those negative yielding markets, which are pretty numerous around the world, will be an important thing for investors,” he said.
“2017 won’t be the same as 2016 but one thing that is for sure, that the micro structure of many markets like FX, fixed income and to a certain extent equities, have evolved to a state where news can cause much bigger shocks than it could have zero or 15 years ago.”
While US President Donald Trump’s economic policy will likely produce much of that market volatility, some winners are expected to emerge from it, according to SSGA chief economist Chris Probyn.
“One of the reasons why markets are run up is the prospect of deregulation, which saw financial stocks do particularly well post-Trump’s election,” Mr Probyn said.
Mr Trump’s promise to slash corporate tax rates in particular could see smaller US enterprises thrive under the new regime and promote inflation.
“Corporate taxes are the low-hanging fruit because everyone wants it cut it given it’s the third-highest corporate tax rate in the world which will benefit small and medium enterprises,” Mr Probyn said.
"This is the first time in recent years that I am having meetings with colleagues and we’re mentioning inflation,” he added.