Published Originaly published on Psigma

Our expectation is that 2018 will be somewhat similar to 2017 from an economic perspective.”​

The last two years have been a great time to be an investor. As the global economy has continued to accelerate from the slowdown and industrial recession experienced in 2015, asset markets around the world have risen strongly. The gains generated by decent economic performance and specific corporate fundamentals have been amplified by the aggressive policies of global central banks. Moreover, the classic contrarian opportunity to buy many riskier investments in early 2016 has been fulfilled and those investors brave enough and patient enough to stick with their investments at a time of pain in financial markets have been rewarded.

Our expectation is that 2018 will be somewhat similar to 2017 from an economic perspective, although growth will moderate through the year back to a similar level that we have experienced since the financial crisis of 2008. Risks undoubtedly exist, despite the bullish chants of the optimistic chorus. A return of inflation, interest rate rises and a slowdown in China are the preeminent risks we are evaluating as we head into next year. We expect our portfolios to make low positive returns next year, but any gains are likely to be driven by specific and selective investment opportunities.

Investors must recognise that returns in the future are unlikely to match either those healthy gains of the last few years or long run history, despite the fact that the global economy appears to be currently enjoying a moment in the sun. If we see further gains from today’s lofty levels, we might have to assume that asset markets are doing their own impression of Icarus and our “balanced, with a hint of caution” investment stance, could become outright “cautious” for the first time since 2008.

You can read Psigma’s full report here.

Related Articles