In the wake of the Brexit and the Trump vote, and at the threshold of important elections in Europe, the global macro environment and asset allocation outlook give plenty of food for thought.

Against the backdrop of global growth, which is set to accelerate in 2017 for the first time since the financial crisis, our global macro analysis examines why commentators repeatedly worry about slowing US growth, despite eight years of economic expansion. Meanwhile, while the euro zone returns to self-sustaining growth, political events might impact this recovery.

In Emerging countries, the recessions in Brazil and Russia appear to be over, while Chinese growth is moderating, albeit slowly.

These global macro dynamics might imply a possible end to the low-growth and low-inflation environment, that on their turn result in an asset allocation outlook signalling higher inflation and stronger growth in the coming months.

Alongside these macro and asset allocation views, we set out the case for four compelling investment strategies that can protect investors against macro-economic shifts and exploit changing correlations to improve risk-adjusted returns:

  • Inflation-linked bonds:The spectre of deflationary stagnation has now receded and inflation and inflation expectations should rise in 2017. US inflation-linked bonds, in particular, should outperform their nominal peers.             
  • Robotics: Robots are part of a new industrial revolution ; a technology revolution which, like earlier industrial revolutions, will generate substantial wealth for far-sighted investors. Robotics and other innovative technology companies have significantly outperformed over the last decade, returning more than 200% to investors, while the MSCI World is up only 50%.
  • Diversification 2.0.:Amid QE and political risk, investors should re-assess their investment process. Balanced portfolios of equities and bonds are less diversified than in the past and investors need to find and implement new sources of diversification.
  • Emerging market debt: EM debt remains an under-allocated asset class. But the “search for yield” dynamic has inflated EM bond prices. So valuations appear extended just as the US Fed is likely to turn hawkish and trigger a correction in US Treasury yields.


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