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Market Outlook

Brompton invests globally in all major asset classes. In making asset allocation decisions, first, we use information conveyed by numerous data releases to build a picture of the global economic outlook. Secondly, we combine the message from the data with our knowledge and investment experience to determine which investments are likely to perform in the prevailing economic conditions. Thirdly, we analyse valuations to identify genuine opportunities. Please use the dropdown menu to view our current thoughts about each major asset class and geographical region.


  • US, UK and eurozone inflation rose from low levels in 2017
  • Monetary policy remains accommodative.
  • Federal Reserve and Bank of England raised interest rates in 2017 and further increases likely in 2018
  • European Central Bank and Bank of Japan still expanding monetary support
  • Global economy growing steadily; manufacturing leading indicators signal acceleration, consumer spending strong


  • Equities should perform well, with economic growth stead and inflation rising from subdued levels
  • Monetary and fiscal easing are positive for risky assets
  • Cyclical companies may outperform expensive “quality” companies as inflation rises
  • Valuation support for equities in Europe ex-UK, Japan and some emerging markets
  • US valuations high but may persist amid low inflation and steady economic growth


  • US inflation has risen because of recovery in industrial commodity prices and is close to central bank target
  • Inflation may rise further than anticipated as near-full employment fosters wage inflation
  • Bank of England policy remains highly accommodative notwithstanding inflation significantly above Bank of England target
  • Emerging market bonds may perform well as inflation falls in some economies such as Brazil and India


  • Few signs for now that tighter monetary policy has materially impacted economy as witnessed by senior loan officer surveys
  • Fiscal stimulus from newly-signed Tax Cuts and Jobs Act should promote consumer and business spending growth
  • US financials to benefit from improving profitability as US longer-dated bond yields rise more than shorter-dated yields
  • Consumer confidence high as a result of cheap fuel and higher employment
  • Dollar weakness in 2017 supportive for US exporters


  • Rising inflation sends sterling higher on a trade-weighted basis
  • Further rises may reduce UK’s export competitiveness
  • Consumer spending may be squeezed by higher inflation as real wage growth remains subdued
  • Bank of England raised rates in November 2017 but may be too dovish on likely pace of further monetary tightening
  • Brexit talks progress, with discussions moving on to trade

Europe ex-UK

  • European Central Bank quantitative easing set to continue this year and no interest rate rise anticipated until sometime thereafter
  • Eurozone leading indicators and economic growth strengthen
  • Unemployment falls but national disparities remain
  • Political risk somewhat lower but voter support for anti-European Union parties remains a risk, particularly in Italy
  • Greece may require further debt forgiveness


  • Bank of Japan policy of near-zero 10-year government bond yields intended to weaken currency and stimulate inflation
  • Japanese equities lowly valued relative to other equity markets
  • Yen a safe-haven asset at times of market stress
  • Abe could be Japan’s longest-serving post-war prime minister following October election victory


  • Currency falls in August 2015 and January 2016 sparked
  • fears of global deflation
  • Renminbi regains competitiveness since 2016
  • Economic growth close to 7% official target
  • Impact of high debt levels on public and corporate sectors unclear

Asia Pacific ex-Japan and emerging markets

  • Some emerging markets benefiting from stronger global trade
  • Weaker dollar and fewer US protectionist measures than feared may buoy equities in 2018
  • Stronger commodity prices benefit commodity exporters
  • Some regional equity markets supported by valuations
  • India benefits from government reforms, which have increased ease of doing business

Hedge funds

  • Returns have disappointed since credit crisis
  • Some funds may deliver positive risk-adjusted returns and reduce portfolio risk as longer-dated bonds and some equities appear expensive
  • Rising inflation may lead to rotation from “expensive defensives” to more lowly-valued cyclical stocks and increase the opportunities for long/short managers
  • Undertakings for Collective Investment in Transferable Securities (UCITS) regulation a Brompton requirement


  • Gold retains safe-haven attractions at times of heightened volatility
  • Gold demand may fall among financial buyers as inflation and interest rates rise, increasing opportunity cost of holding nil-yielding assets
  • Gold mining shares highly sensitive to gold price changes
  • Chinese central bank purchases lower than expected
  • India introduces policies to discourage gold hoarding


  • Supply-side shock in 2014 led to oil price fall as producers competed for market share
  • US oil output fall in 2016 led to oil price recovery but US oil output rose in 2017
  • Opec and Russian production accord reduces risk of renewed oil price weakness
  • Commodity prices sensitive to Chinese demand


  • Brexit may reduce demand for London offices
  • Higher UK inflation may lift bond yields and reduce demand for longer-duration assets such as commercial property
  • Financial Conduct Authority invites comments on “illiquid assets and open-ended investment funds” paper in response to post-EU referendum suspension of some open-ended funds
  • Weak sterling increases attraction of UK properties to non-sterling buyers and may stimulate rental demand in longer term
This market outlook is based on the opinions of Brompton’s asset management team at the time of writing, supported by publicly-available information and other sources that Brompton believes to be reliable. Brompton cannot guarantee the accuracy of the information expressed. The views and opinions expressed are subject to change. They do not constitute investment advice and should not be relied upon as such. Nor should they be considered a solicitation or recommendation to buy or sell a security. Brompton will not be liable for any direct or indirect losses arising from the use of this material. Past performance is no guarantee of future performance and the value of investments, and the income from them, may fall as well as rise.

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