It is natural to approach each New Year with optimism, but markets had faltered just one month into 2016. Global equities stood around 12% down from their peak1 and oil had slipped to under USD30 per barrel – the lowest price since 2003. Many have already conceded that their wish for a prosperous New Year will not be granted.
The harm to investor confidence is understandable but investors should resist the temptation to portray 2016 as wrecked.
That said, there are some trends that need careful consideration. Volatility is likely to remain high while monetary policies diverge. The UK is likely to increase rates this year, while the US could tighten further. Meanwhile, the European Central Bank, Bank of Japan and People’s Bank of China are each undertaking various forms of monetary loosening. The uncertainty around the relative
speed and strength of policy changes may create rapid currency movements and phases of asset price adjustment.
Source : AXA Real Estate