As financial markets worldwide continue to rally and the global economic outlook seems bright, the biggest question is how long the expansion can last.
It might not be until 2020 that one should get more concerned, said Mr Anthony Raza, Head of Multi-asset Strategy at UOB Asset Management (UOBAM) as he spoke on three key themes influencing investors’ decisions in 2018: Business cycle, valuations, and risks.
For though the current phase of global economic growth is one of the longest in history, relatively mild growth thus far might allow the expansion to go on.
“The bulb that burns half as bright could possibly burn twice as long,” Mr Raza said.
Out of a checklist of seven indicators that might predict a recession in the coming year and a half, none are flashing any warning signals, he noted. For example, there are no signs of high loan growth, junk bond selloffs, and bank liquidity problems.
“We’re bullish for 2018, with a slight overweight on equities and a slight underweight on fixed income. Returns on equities should be 8 to 10 per cent, and for fixed income, in the low single-digit range.”
While companies around the world are taking on more debt, they…