Investment Outlook and Review Winter 2017

05 February 2018

2017 turned into the second consecutive positive year for growth investors, with strong returns having been delivered across a broad range of asset classes and investment strategies. It is worth noting that returns were concentrated at the beginning and end of the year with relatively unexciting second and third quarters in between. Many economists were somewhat surprised by the positive outcome of equity markets for 2017. At the start of the year numerous investment professionals were concerned that the combination of political instability and economic uncertainty would lead to increased financial market volatility and disappointing investment returns, but the year did not work out that way.

Investors were battling with significant concerns regarding market performance in 2017. While we share many of those concerns we have remained positive on growth assets (just slightly less positive at the end of 2017 than we were at the beginning of the year). The reason we remained positive on markets was that we thought that the global economic environment had all the building blocks in place to be broadly supportive of economic growth, and corporate profitability was also resilient. There was a noticeable absence of global inflationary pressure and fewer than expected interest rate rises which enabled markets to make progress.

The current market cycle has been a long and gradual economic expansion and despite the frequently occurring low market volatility across asset classes, investors have found themselves preoccupied by external factors. At the start of 2017, market participants were distracted by a seemingly populist political outlook and although ultimately, neither global growth worries nor political
fears materialised, the market continued its upward momentum in the face of these concerns.

Looking ahead our view is that the investment environment could get more challenging over the next phase of the market cycle. We expect the markets to look to consolidate recent gains and ascertain how much of this positive expectation of growth is already discounted into the price.

Our view continues to be that an active, pragmatic and disciplined approach to investment management can assist us in delivering investment returns for our clients.

This edition covers: Fixed Income | Government Bonds | Corporate Bonds | Developed Market Equity | Emerging Market Equity | Conclusion

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While JLT Investment Management believes that the information in this report is correct at the date of the report, no warranty or representation is given to this effect and no responsibility can be accepted by JLT Investment Management for any action taken on the basis of the information. This document and any accompanying materials are for information only. They are not a prospectus or listing particulars, do not contain any representations, do not constitute or form part of any offer or invitation to sell or transfer, or to underwrite, subscribe for or acquire, any shares or other securities, and do not constitute or form any part of any solicitation of any such offer or invitation, nor shall they or any part of them or the fact of their distribution form the basis of or be relied upon in connection with any contract.