Emerging markets lead the way

Risks

• Increase in political risks across most Western countries: Europe’s turn in the spotlight
• Global debt burdens (and associated servicing costs) remain a concern in emerging markets
• Difficulties in normalising monetary policy could only become apparent as policymakers unwind emergency measures
• Shrinking valuation buffers in most risk assets (i.e. higher equity multiples, tighter credit spreads)

Opportunities

• Bouts of investor nervousness and volatility may present recurrent opportunities to add risk at attractive levels
• Potential US dollar strength as Fed hikes come back into focus
• Potential for higher inflation not yet reflected in index-linked markets
• Asset purchases by central banks (outside of the US) could keep asset prices supported