We are unlikely to see a market meltdown this year says Kames Capital

9th January 2017

Markets around the globe are not likely to descend into meltdown this year, with prospects for economic growth actually looking brighter than they have for some time, Kames Capital’s chief investment officer Stephen Jones says.

Jones, who oversees £51.3bn of assets under management in his role as CIO, said while there have been elevated concerns about the outlook for the global economy following major regime changes around the world, loose central bank policy and a willingness among politicians to support growth should prevent any kind of meltdown.

“One risk we probably do not have to dwell too much on in 2017 is that of global meltdown. There is enough momentum, with quantitative easing and growing signs of fiscal largesse among political leaders, to take us through to 2018 without serious threat of recession.”

Indeed, rather than be too pessimistic, Jones said regime changes in countries across the developed world might actually spark a move out of the torpor that has existed over the past few years.

“Politicians have woken up to the fact that a bit more balance in their policies might be worthwhile, not leaving it all to the central bankers and their limited number of monetary policy screwdrivers,” he said.

“We might even move from low growth and decreasing interest rates to something that might look like a much higher level of growth, creating M&A activity that gives new impetus to markets.”

One such area Jones expects this regime change could have a noticeable impact is the US, where President-elect Donald Trump is poised to take control.

“President Trump’s mooted tax changes might persuade US companies to bring cash back from overseas and that would stimulate the American economy,” he said.

“Banks would be a big beneficiary which, in turn, might generate confidence and more lending. More deals mean better profitability, allowing the painfully slow capital building process to step up a pace.”

However, as 2016 showed investors, wild swings remain possible, with plenty of “storm clouds” to fret about. In this environment, Jones said being nimble remains the key trait for investors to exhibit.

“The fact is we are in a new era of nuanced investing which is about spotting trends very quickly, and rotating in and out of asset classes every few months,” he said.

“Therefore, investors need to be agile and prepared to think on their feet, although they can be confident that this long positive cycle has one last gasp in it.”

 

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