After a year marked by central bank policy, performance in 2016 should be shaped by growth and inflation criteria. If the first week of 2016 is a good guide, resurging volatility in particular will continue to rattle investors. In such a shifting environment, a flexible and selective approach to investing is recommended and Europe is clearly the most attractive region.
On January 12, 2016, Edmond de Rothschild Asset Management (France) presented its annual Investment Strategy. In the video below, Philippe Uzan, head of Long Only Investments, discusses the economic outlook for 2016.
Improving financial conditions, a gradual revival in consumer confidence, less budgetary rigour, lower company defaults and cleaned-up bank balance sheets have helped usher in a more favourable business climate in Europe.On the monetary front, the European Central Bank should continue to play an active role as watchdog. Its accommodating stance could be stepped up in coming months and it has already announced that its asset purchase programme is to be extended beyond September 2016.European equity markets were not immune from volatility in 2015 but they benefit today from a favourable environment and healthy companies. In addition, the uncoupling of US and European monetary policy favours Europe which also boasts sound fundamentals.Against this backdrop, and after four years of rising markets, are European stock valuations still attractive? Which themes and sectors should we focus on in 2016?
In December, the Fed raised its benchmark rate for the first time since in 10 years. The monetary policy horizon is now clear and many US indicators suggest that the economy there is doing well. In the US (as in Japan), household consumption will be the main growth driver in 2016. Will this growth be robust? Which segments offer value?In recent months, China has only had to sneeze for the rest of the world to catch cold. Despite recurrent turbulence on China’s stock markets, the country’s economic policy has been radically overhauled: restrictive measures have been lifted and monetary stimulus via interest rates and liquidity introduced. How efficient will this prove in 2016?For the overall emerging market zone, the worst of the correction was perhaps in 2015 and the economic picture, albeit fragile, should stabilise, helping some assets to stage a comeback after a difficult period. Should we move back into emerging markets in 2016? In such a rapidly changing environment, stock selection really comes into its own.
Equities - overweight on the asset class
2016: Europe is at the heart of our investments