2016 has not had the most fortuitous start with developed and emerging market equities both falling sharply.
As the Chinese government struggles
to manage the transition of China from an export to a consumer led economy, we
believe the likely spill-over effects from a slowdown will have a detrimental
impact on emerging markets. In addition, commodity export reliant countries
such as Russia, South Africa and Brazil (many of which have other structural
issues) are likely to come under renewed pressure as lower demand and higher supply
continue to weigh on natural resource prices.
Look to the West
In developed markets we
expect relatively strong growth, particularly in the UK and US. However, our
expectations are now slightly lower given the renewed deflationary pressures
across the globe and the likely reduced demand from emerging markets. In
addition, in the event that the global economy takes a dramatic turn for the
worse, we remain mindful of the potential downside risks particularly given the
limited amount of tools policy makers have left to stimulate their economies.