Divergences in growth and monetary policy around the world are expected to lead to a more volatile market mix in the coming year. In this special report, experts from across BNY Mellon Investment Management and its affiliates present their views on what to expect in major capital markets for 2015.
PREPARED FOR PROFESSIONAL CLIENTS ONLY
With diverging policy, political unrest and market volatility to the fore, uncertainty looks set to prevail
Divergences in growth and monetary policy around the world are expected to lead to a more volatile market mix in the coming year. In this special report, experts from across BNY Mellon Investment Management and its affiliates present their views on what to expect in major capital markets for 2015 and why an active, flexible approach to investing will be more important than ever.
BNY Mellon Chief Economist Richard Hoey expects the global economy to continue to expand, despite some short-term disruption as policy normalization progresses in the U.S. Portfolio manager James Lydotes of The Boston Company, however, believes that U.S. interest rates may remain “lower for longer,” perhaps even until 2020 because of ongoing weakness in the U.S. economy. One area where continued weakness in the U.S. can be seen is the choppy recovery of the housing market. Boston Company research analysts Carl Guerin and Raphael Lewis don’t expect 2015 to feature a snapback recovery that housing experienced after recessions in the mid-1970s and early 1980s and 90s.
Unlike the U.S., the Eurozone is warding off deflationary pressures, but there are nonetheless likely to be investment bright spots for discerning managers. Paul Hatfield, Chief Investment Officer of Alcentra points out that opportunities for direct lending to small and medium-sized European companies will grow in the new year as increased regulation and higher capital requirements compel banks to reduce lending.
Urban Larson of Standish Mellon Asset Management points out that emerging market debt may feel the effects of developed market central bank policy shifts keenly. He believes investors should look to sovereign and corporate issuers that are less dependent on the cheap international financing that has been so abundant.
With reduced liquidity and a strengthening dollar, differences in fundamentals across emerging economies may matter more in 2015. Amy Leung of Newton is watching the progress of China’s shift to domestic consumption after 30 years of export-driven growth. She sees a slowdown in 2015 as reforms proceed, but still expects China to successfully re-engineer its economy in the longer term.
Brazil in 2015 offers another example of the increasingly varied states of health among emerging market economies. Solange Srour, chief economist at ARX Investimentos, BNY Mellon’s Rio de Janeiro-based investment affiliate, says hoped-for reforms that could benefit investors may be at odds with the agenda of newly reelected President Dilma Rousseff.
Currency is another source of risk investors may want to pay closer attention to in 2015. Charles Dolan and Elena Goncharova of BNY Mellon’s Investment Strategy and Solutions Group* expect currency volatility to make a comeback, as monetary policy diverges around the world.
However, Iain Stewart of Newton and Jack Malvey, Chief Strategist at BNY Mellon Investment Management, both say that investors should focus less on seeking opportunities created by monetary policy and more on factors such as corporate earnings and geopolitical risk.
*BNY Mellon Investment Strategy & Solutions Group (“ISSG”) is part of The Bank of New York Mellon (“Bank”).
Divergences in growth and monetary policy around the world are expected to lead to a more volatile market mix in the coming year.
BNY Mellon Investment Management
Share this quote:
Raman Srivastava, Standish and
Holger Fahrinkrug, Meriten
A growing divergence between US and European bond yields reflects the shifting strategies of global central banks.
Richard Hoey and Jack Malvey, BNY Mellon
The long-anticipated normalization of monetary policy by the Federal Reserve and Bank of England could finally arrive in 2015.
James Lydotes, The Boston Company
The consensus expectation is that the Federal Reserve will raise U.S. interest rates, but the Boston Company’s infrastructure portfolio manager, James Lydotes, thinks differently.
Iain Stewart, Newton
Iain Stewart, who leads Newton’s Real Return team, examines the reasons for the team’s reluctance to invest in assets that have benefited from the policy actions of the authorities.
Elena Goncharova, BNY Mellon Investment Strategy and Solutions Group and
Charles Dolan, BNY Mellon
Currency volatility has been subdued in recent years as many investors have increased allocations to international assets.
April LaRusse, Insight Pareto
Although interest rate hikes are expected in 2015, the timing of such action is an unknown while the extent of a market reaction (or lack of one) when it happens is a mystery.
Paul Hatfield, Alcentra
Against a low interest rate backdrop, Paul Hatfield, chief investment officer and head of the Americas at the Alcentra Group, takes an upbeat stance on credit and loan market prospects despite some market concerns about the potential for overheated valuations and deteriorating credit values.
Simon Cox, BNY Mellon IM Asia Pacific
In 2014 investors enjoyed a welcome break from several years of fretting about ‘mountainous’ public debt in the mature economies.
Urban Larson, Standish
Historic links between the performance of U.S. Treasuries and emerging market debt make the actions of the U.S. Federal Reserve an important consideration in analysing the asset class, according to Urban Larson, Standish senior product specialist, emerging markets debt.
Carl Guerin and Raphael Lewis, The Boston Company
With the U.S. housing economy still in recovery mode more than six years on from the peak of the financial crisis, what do the coming years hold for U.S. housing and what role do the so-called ‘millennials’ have to play in this story?
Amy Leung, Newton
After years of rapid economic development in China, stellar growth has given way to growing market uncertainty as markets look towards 2015.
Solange Srour, ARX Investimentos
In the Brazilian elections in October 2014, after a long and fraught campaign President Dilma Rousseff won a narrow victory. Political uncertainty may have subsided but with the Brazilian economy in the doldrums and commentators banging the drum for harsh reforms, what are the prospects for the dilapidated poster-boy of South America?
BNY Mellon’s multi-boutique model encompasses the skills of 13 specialized investment managers who are all leaders in their respective fields. Each is solely focused on investment management, and each has its own unique investment philosophy and process.
BNY Mellon Investment Management is an investment management organization, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally.
The information in this document is not intended to be investment advice, and it may be deemed a financial promotion in non-U.S. jurisdictions. Accordingly, where this document is used or distributed in any non-U.S. jurisdiction, the information provided is for Professional Clients only. This material is not for onward distribution to, or to be relied upon by Retail Clients.
Any statements and opinions expressed in this document are correct as at the date of publication, are subject to change as economic and market conditions dictate, and do not necessarily represent the views of BNY Mellon or any of its affiliates. The information contained in this document has been provided as a general market commentary only and does not constitute legal, tax, accounting, other professional counsel or investment advice, is not predictive of future performance, and should not be construed as an offer to sell or a solicitation to buy any security or make an offer where otherwise unlawful. The information has been provided without taking into account the investment objective, financial situation or needs of any particular person. BNY Mellon and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. This document is not investment research or a research recommendation for regulatory purposes as it does not constitute substantive research or analysis. To the extent that these materials contain statements about future performance, such statements are forward looking and are subject to a number of risks and uncertainties. Information and opinions presented in this material have been obtained or derived from sources which BNY Mellon believed to be reliable, but BNY Mellon makes no representation to its accuracy and completeness. BNY Mellon accepts no liability for loss arising from use of this material. If nothing is indicated to the contrary, all figures are unaudited.
Any indication of past performance is not a guide to future performance. The value of investments can fall as well as rise, so you may get back less than you originally invested.
This document is not intended for distribution to, or use by, any person or entity in any jurisdiction or country in which such distribution or use would be contrary to local law or regulation. This document may not be distributed or used for the purpose of offers or solicitations in any jurisdiction or in any circumstances in which such offers or solicitations are unlawful or not authorized, or where there would be, by virtue of such distribution, new or additional registration requirements. Persons into whose possession this document comes are required to inform themselves about and to observe any restrictions that apply to the distribution of this document in their jurisdiction. The investment products and services mentioned here are not insured by the FDIC (or any other state or federal agency), are not deposits of or guaranteed by any bank, and may lose value.
This document should not be published in hard copy, electronic form, via the web or in any other medium accessible to the public, unless authorized by BNY Mellon Investment Management.
This document is approved for Global distribution and is issued in the following jurisdictions by the named local entities or divisions: Europe, Middle East and Africa (excluding Germany, Brazil, Dubai): BNY Mellon Investment Management EMEA Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Conduct Authority. • Canada: Services offered in Canada by BNY Mellon Asset Management Canada Ltd. • Germany: Meriten Investment Management GmbH which is regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. • Dubai, United Arab Emirates: Dubai branch of The Bank of New York Mellon, which is regulated by the Dubai Financial Services Authority. This material is intended for Professional Clients only and no other person should act upon it.• Singapore: BNY Mellon Investment Management Singapore Pte. Limited Co. Reg. 201230427E. Regulated by the Monetary Authority of Singapore. • Hong Kong: BNY Mellon Investment Management Hong Kong Limited. Regulated by the Hong Kong Securities and Futures Commission. • Japan: BNY Mellon Asset Management Japan Limited. BNY Mellon Asset Management Japan Limited is a Financial Instruments Business Operator with license no 406 (Kinsho) at the Commissioner of Kanto Local Finance Bureau and is a Member of the Investment Trusts Association, Japan and Japan Securities Investment Advisers Association. • Australia: BNY Mellon Investment Management Australia Ltd (ABN 56 102 482 815, AFS License No. 227865). Authorized and regulated by the Australian Securities & Investments Commission. • United States: BNY Mellon Investment Management. • Canada: Securities are offered through BNY Mellon Asset Management Canada Ltd., registered as a Portfolio Manager and Exempt Market Dealer in all provinces and territories of Canada, and as an Investment Fund Manager and Commodity Trading Manager in Ontario. • Brazil: this document is issued by ARX Investimentos Ltda., Av. Borges de Medeiros, 633, 4th floor, Rio de Janeiro, RJ, Brazil, CEP 22430-041. Authorized and regulated by the Brazilian Securities and Exchange Commission (CVM). The issuing entities above are BNY Mellon entities ultimately owned by The Bank of New York Mellon Corporation
BNY Mellon Company information
BNY Mellon Cash Investment Strategies is a division of The Dreyfus Corporation. • Insight Investment Management Limited and Meriten Investment Management GmbH do not offer services in the U.S. This presentation does not constitute an offer to sell, or a solicitation of an offer to purchase, any of the firms’ services or funds to any U.S. investor, or where otherwise unlawful. • BNY Mellon owns 90% of The Boston Company Asset Management, LLC and the remainder is owned by employees of the firm.• The Newton Group (“Newton”) is comprised of the following affiliated companies: Newton Investment Management Limited, Newton Capital Management Limited (NCM Ltd), Newton Capital Management LLC (NCM LLC), Newton International Investment Management Limited and Newton Fund Managers (C.I.) Limited. NCM LLC personnel are supervised persons of NCM Ltd and NCM LLC does not provide investment advice, all of which is conducted by NCM Ltd. Only NCM LLC and NCM Ltd offer services in the U.S.• BNY Mellon owns a 20% interest in Siguler Guff & Company, LP and certain related entities (including Siguler Guff Advisers LLC). GE015-31-05-2015 (6M). Issued 27.11.2014. T1415 11/14.
© 2014 The Bank of New York Mellon Corporation. All rights reserved.