16 December 2014
Historically high sovereign debt levels are casting a shadow over the 2015 global investment outlook, according to the Group Chief Investment Officer at KBL European Private Bankers (KBL epb), which today released its annual projections for the world economy, financial markets and key asset classes.
At a time when the majority of developed nations operate with debt-to-GDP ratios in excess of 80%, states are disincentivizing saving, including through the quantitative easing process that has led to today’s near-zero interest rate environment, according to Stefan Van Geyt, KBL epb’s Group CIO.
As governments, especially in Europe, seek to promote individual borrowing and spur inflation, investors are now struggling to generate sustainable returns above the rate of inflation.
In such an environment, Van Geyt said, two asset classes hold particular appeal: equities, particularly those with pricing power and growing dividend streams; and property, where landlords have the ability to raise rents.
This overarching theme informs the Luxembourg-headquartered private banking group’s 2015 Global Investment Outlook, which was published today.
From a macroeconomic perspective, Van Geyt expressed cautious optimism about the world economy, saying that while eurozone growth will remain subdued next year, it would nevertheless accelerate in the second half, supported by potentially positive oil-price impacts.
Meanwhile, the US economy is expected to expand by 3% in 2015, driven by positive trends such as credit growth, the shale oil revolution, corporate innovation and reshoring.
Van Geyt highlighted that Japan’s economy will remain vulnerable, but should grow by just over 1% next year, supported by higher export levels, increased productivity and potential growth in domestic power production. Commodity importing emerging markets like China and India will have a strong 2015, he added, while commodity exporters such as Brazil and Russia will face ongoing challenges.
Turning to asset classes, the Group CIO of KBL epb expressed a preference for US and Japanese equities, as well as listed global real estate, expecting them to outperform primarily due to the reasons cited earlier.
Fixed-income investors face a challenging 2015, he said, though the outlook is appealing for dollar-denominated emerging market debt and peripheral bonds. Among currencies, the US dollar will continue to strengthen against the euro, likely reaching EUR/USD 1.15 at some point in 2015.
Van Geyt concluded by reviewing the outlook for commodities, saying that oil prices will likely remain under pressure and gold may fall, while agricultural and industrial commodities should remain stable.