Thu, Nov 08, 2018 - Page 12 News List

Trade spat, inflation pose downside risks: Schroders

By Crystal Hsu  /  Staff reporter

The US-China trade spat and inflation pose the two biggest downside risks for investment markets next year as global economic growth enters the end of a cycle, but has not come to an end, Schroders Investment Management said on Tuesday.

The British asset management company maintains a long view on global equities, forecasting they would deliver positive returns next year on the back of improved corporate earnings.

“Both corporate earnings and economic growth remain supportive,” as evidenced by the continued uptrend in purchasing managers’ activities, Schroders Asia multi-asset investment head Patrick Brenner told a news conference in Taipei.

The expansion has reached a late stage with rising inflation to pose the major risk, Brenner said on behalf of Schroders in disclosing its top 10 predictions for next year.

Next year will see tight labor markets buoying inflation in developed markets, he said.

US inflation has picked up and would likely rise further next year, Brenner said, adding that Japan and Europe might also see higher prices driven by tight labor markets.

The observation helps explain the company’s long view on equities, commodities and gold, but its short position on investment grade credit.

It is upbeat about US Treasuries versus German Bunds, and expects Chinese onshore government bonds to fare better.

In addition, Schroders said it believes equities in emerging markets would outperform European shares next year.

The European banking sector would put up a stronger performance versus European equities, while the Japanese yen would be stronger than the euro, Brenner said.

Schroders scored 50 percent for its predictions for this year among which were US 10-year yields rising from 2.4 percent to 3.1 percent, the Malaysian ringgit appreciating against the Singaporean dollar by 3 percent and the South Korean won depreciating against the greenback by 3 percent.

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