Standard Chartered Bank has predicted a stronger economic growth with rising inflation for the global economy in 2018.
This formed part of the Wealth Management Advisory Outlook for 2018 of the international bank titled: “Turning up the Heat.”
According to the Chief Investment Strategist at Standard Chartered Bank, Steve Brice, growth accelerated in 2017, while inflation did not.
He added: “We believe a gradual ‘heating up’ of the global economy is likely in 2018, with robust economic growth and inflation finally increasing. Our Outlook 2018 report is designed to help our clients navigate these market conditions.”
The report highlighted the takeaways from its 2018 economic to include that the “Goldilocks” environment (that is not too hot, not too cold) of strong growth and limited inflation was likely to extend into the early part of 2018, adding that continued earnings growth means equities and corporate bonds have room to extend gains going into 2018
“Inflation is the main risk to this “Goldilocks” scenario, especially further into 2018. A larger-than-expected rise in inflation would mean the environment could turn too hot, forcing central banks to tighten policy more aggressively than markets currently expect.”
Commenting on the investment implications, its Regional Head of Wealth Management for Africa, the Middle East and Europe – Head of Wealth Management for the UAE, Standard Chartered Bank, Gautam Duggal said,“We suggest investors continue to tilt towards equities, which generally do well in the late stage of the economic cycle, as we do not believe valuations are a constraint to a strong performance in 2018. To contain potential downside risks, we advise investors to progressively increase allocations to diversified alternative strategies, likely to be less volatile than traditional asset classes.”
The bank was also of the view that the US Dollar would weaken modestly, supporting its preference for bonds in Emerging Markets – especially USD sovereign and Asia corporate bonds.