As we look forward to 2017, we see selective opportunities for positive returns across risk assets, with a continuing preference for the United States. Our optimism is tempered by the recognition that it is highly dependent on the actions of President-Elect Donald Trump and the Federal Reserve, and the growing influence of populism globally. In formulating our views, we continue to reflect on what dominated the headlines and drove markets over the past year. 2016 got off to a very rocky start with the MSCI World Index falling by 2 percent on the first day and U.S. equities recording the worst-ever start to a year. Concerns about the Chinese economy sent global markets into a tailspin. But at the risk of overusing a tired turn of phrase, it was a “tale of two markets” as trends reversed in the second half of the year, as investors moved past the surprising results of the Brexit referendum and Mr. Trump’s presidential victory to push indexes to new highs. To wit, several of these market drivers may prove to be prologue to what unfolds in the New Year.
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