State Street Global Advisors, the asset management arm of State Street Corporation (NYSE: STT), today released its Global Market Outlook for 2018 – Step Forward, Look Both Ways – predicting that the coming year will be supportive of risk assets. However, the maturity of the growth cycle and a number of structural uncertainties will warrant a degree of caution.

State Street Global Advisors forecasts more evenly distributed global growth, which it expects to return to its historical trend rate of 3.7 percent in 2018, supporting company earnings and pushing equity markets even higher. The firm sees the best opportunities further down the cap spectrum within the US, and views developed markets such as Japan and Europe as particularly attractive.

“The slow but steady improvement in global growth, coupled with modest inflation, provides the kind of macro environment that can continue to lift markets higher,” said Rick Lacaille, global chief investment officer for State Street Global Advisors. “Valuations, although extended in some sectors, remain below fair value at current interest rate levels. Japan is arguably the most attractive developed market, given relatively low interest rates and a weak currency.”

The firm also expects that the ongoing move away from extraordinary monetary policy accommodation, alongside evidence of lower cross-asset class correlations, could be more conducive for active equity managers.

“Historically low interest rates and policy-driven liquidity following the global financial crisis have challenged active managers through higher correlations and lower volatility,” said Lori Heinel, deputy global CIO for State Street Global Advisors. “That backdrop is changing. However, careful consideration of where, when and how to go active is essential in order to strike the right balance alongside smart beta and core index exposures.”

State Street Global Advisors also sees more opportunity in bond markets. While further rate rises from the US Federal Reserve (Fed) and European Central Bank (ECB) are in store despite low inflation, the firm expects rates to stay anchored at a relatively low level.

“While we are unlikely to see the bond bull to keep charging in 2018, we do think the bears will probably be proven wrong for another year, even as the Fed is expected to raise rates and other major central banks begin tapering their accommodative policy. That said, investors need to balance duration and credit risks carefully. While emerging market debt valuations have become less attractive, a tilt towards quality can continue to deliver results,” added Lacaille.

State Street Global Advisors tempers its outlook with a degree of caution recognizing that, eight years into the growth cycle, some investors are increasingly wary of the potential for a pullback.

“While volatility remains low, the SKEW Index continues to be elevated, suggesting investors are worried about a low-probability, high-impact market correction. We are at that point in the cycle when investors should review the tail risk protection in their portfolios. The fundamental backdrop remains favorable, however. We think investors should look both ways. They should take a more cautious and risk-aware stance as they step forward to make the most of the opportunities that synchronized global growth will likely offer in 2018,” Heinel concluded.

To view the full Global Market Outlook, click here.

About State Street Global Advisors

For nearly four decades, State Street Global Advisors has been committed to helping our clients, and those who rely on them, achieve their investment objectives. We partner with many of the world’s largest, most sophisticated investors and financial intermediaries to help them reach their goals through a rigorous, research-driven investment process spanning both indexing and active disciplines. With trillions* in assets, our scale and global reach offer clients unrivaled access to markets, geographies and asset classes, and allow us to deliver thoughtful insights and innovative solutions.

State Street Global Advisors is the investment management arm of State Street Corporation.

*Assets under management were $2.67 trillion as of September 30, 2017. AUM reflects approx. $36 billion (as of September 30, 2017) with respect to which State Street Global Advisors Funds Distributors, LLC (SSGA FD) serves as marketing agent; SSGA FD and State Street Global Advisors are affiliated. Please note that AUM totals are unaudited.

Important Information:

Investing involves risk including the risk of loss of principal.

The information provided does not constitute investment advice and it should not be relied on as such.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.

There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

The whole or any part of this work may not be reproduced, copied or transmitted or any of its contents disclosed to third parties without SSGA's express written consent.

This document may contain certain statements deemed to be forward-looking statements. Please note that any such statements are not guarantees of any future performance and that actual results or developments may differ materially from those projected in the forward-looking statements.

The information provided does not constitute investment advice as such term is defined under the Markets in Financial Instruments Directive (2004/39/EC) or applicable Swiss regulation and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell any investment. It does not take into account any investor’s or potential investor’s particular investment objectives, strategies, tax status, risk appetite or investment horizon. If you require investment advice you should consult your tax and financial or other professional advisor. All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy of the information and State Street shall have no liability for decisions based on such information.

Investments in small-sized companies may involve greater risks than in those of larger, better known companies.

Investments in mid-sized companies may involve greater risks than in those of larger, better known companies, but may be less volatile than investments in smaller companies.

Investing in foreign domiciled securities may involve risk of capital loss from unfavorable fluctuation in currency values, withholding taxes, from differences in generally accepted accounting principles or from economic or political instability in other nations.

Equity securities may fluctuate in value in response to the activities of individual companies and general market and economic conditions.

Actively managed funds do not seek to replicate the performance of a specified index.

The Strategy/fund is actively managed and may underperform its benchmarks. An investment in the strategy/Fund is not appropriate for all investors and is not intended to be a complete investment program. Investing in the strategy/Fund involves risks, including the risk that investors may receive little or no return on the investment or that investors may lose part or even all of the investment.

Bonds generally present less short-term risk and volatility than stocks, but contain interest rate risk (as interest rates raise, bond prices usually fall); issuer default risk; issuer credit risk; liquidity risk; and inflation risk. These effects are usually pronounced for longer-term securities. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss.

CORP-3501Expiration Date: 12/31/2018

State Street CorporationAndrew Hopkins, 617-664-2422Ahopkins2@statestreet.com

State Street (NYSE:STT)
Historical Stock Chart
From Mar 2024 to Apr 2024 Click Here for more State Street Charts.
State Street (NYSE:STT)
Historical Stock Chart
From Apr 2023 to Apr 2024 Click Here for more State Street Charts.