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July 19, 2016 | 16:35 | Dubai
With the US economy likely late in its cycle, equity markets fully valued and increased volatility following the Brexit decision, there are significant risks to the outlook for global equities, according to Standard Chartered Bank’s Wealth Management Advisory Group that released its H2 2016 Global Market Outlook, which provides a six-month review of investment framework and analyses key market scenarios for the rest of the year. “Given the possibility of improvements in the performance of equities and positive earnings surprises, investors should still return a significant allocation to equities. These rising uncertainties in equity markets also signal a need for investors to adapt by increasing their allocation to more defensive asset classes, such as US investment grade corporate bonds and global macro strategies,” said Alexis Calla, Global Head of Investment Strategy and Advisory, Standard Chartered Bank.
Emerging Market (EM) equities are expected to continue under-performing, particularly with China quickly backtracking on the economic stimulus implemented earlier this year. With the growth differential expectations between Developed Market (DM) and EM a key factor in the relative performance of each investment class, and a lower conviction as to which regions will outperform or underperform, a more balanced exposure within equities may make sense. From a commodities perspective, we are more bullish on the outlook for gold and oil than for base metals. Gold looks set to target $1400 in the coming 3 months while oil prices are likely to be capped around $60-65 per barrel, the bank said.