Bern Müller s Capital Market Outlook for 2017
Bern Müller s Capital Market Outlook for 2017 Bern Müller proudly presents our annual Capital Markets Forecast for 2017, where we reveal our outlook for the coming year. In this outlook, we briefly dissect the current global economic and geo-political developments that we feel will most affect the markets and highlight the return opportunities across the major asset classes. This publication is intended to assist advisors and investors when making asset allocation decisions, as well as to build a public track record with which potential institutional and individual clients may judge the abilities of our Investment Management team. 2016 was not without its surprises. The election of Donald Trump to the US presidency, the announcement of Brexit, the UK withdrawal of the European Union, in June, and less than expected tightening from the US Fed, all had major impacts on the global markets. It is clear that all three of these factors will continue to reverberate well into 2017 and beyond.
Here are our forecasts by sector ENERGIES We feel the oil and gas market has seen the bottom in regards to pricing in 2016, at least for the foreseeable future. We predict supply will be restrained due to the cutbacks in reserve development projects over the last few years. This doesn t mean the bull market in energies will rage, however. We expect the sector to trade somewhat rangebound for the majority of 2017, until the market can gain enough momentum for the next leg up. METALS The bottom in precious metals also seems to have materialized in 2016. A weakening US Dollar in 2017 should help buoy the sector. Gold is forming a positive upward trendline indicating a reversal of direction. However, unless a major geo-political crisis arises to send investors into safe-haven mode, we anticipate a very slow climb from here. 2007
EQUITIES Populist sentiment in the EU and US initially startled investors in 2016. Since then, however, the election of Donald Trump and his CURRENCIES We strongly feel the crash in the Pound caused by Brexit has created a highly oversold market. Now that investors are over the initial knee-jerk reaction caused by feel, they will begin to take stock of the situation and realize the advantage of Brexit to the British economy. We expect the Pound to rebound strongly in 2017. The situation seems quite the opposite for the US Dollar. promise of major tax cuts has actually renewed expectations for growth in the US and boosted the US equity market. In Europe, the initial shock of After initial weakness in the first half of 2016 due to a lack of rate hikes, the Greenback has skyrocketed after Donald Trump took office. We feel this unsustainable and the overheated US Dollar will come under major pressure in the coming months. Commodity based currencies, AUD and CAD will most likely follow the track of the energy and metals sectors and make a slow but steady climb upwards. Brexit has worn off and the markets are beginning to stabilize. We anticipate rising global equity markets in 2017, with new all-time highs in the US and UK. We feel the biggest story for 2017 may be the exponentially growing cryptocurrency market. As the trend catches on and accelerates, we will look for opportunities in the already popular Bitcoin as well as newer competitors as the technology continues to evolve. We believe these opportunities will come with a higher degree of risk and volatility but will be well worth serious consideration by even the most conservative of investors.
BONDS Brexit and the US election also had a profound impact on both sovereign and U.S. Treasury rates during 2016. The reaction was particularly acute in the European sovereign bond market with many sovereign yields hitting all-time record lows. The yield on the U.S. 10-year Treasury note declined nearly 100 basis points during the first half of the year. The November election in the United States increased rates significantly, driving down prices. The Federal Reserve, however, was unable to push short-term interest rates up nearly as much as it communicated in January, with only one 25 bps move higher in December as opposed to the predicted four increases. We anticipate a continuation of the new trend for slightly higher yields as the global recovery regains steam in 2017. SUMMARY Overall, our outlook for 2017 is quite positive across all sectors. We are recommending heavily weighted positions in both US and UK equities (S&P 500 and FTSE), as well as the Great British Pound (GBP). Buying opportunities abound in energies and precious metals as both sectors seem to have found support and remain well below their post-recession highs. We will be looking to capitalize on the growing excitement surrounding currency alternatives such as bitcoin as well. We suggest buying at the bottom of the trading range and taking short-term profits.
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