2018 Outlook: Time for Balance and Flexibility | Capital Group Canada | Insights



2018 Outlook: Time for Balance and Flexibility

Despite the concerns surrounding financial markets, 2017 produced healthy returns. What will 2018 hold in store? In our 2018 Outlook, our investment professionals offer their perspectives.

Global Economies Continue to Gain Ground

Investors can see blue skies just about anywhere they look heading into 2018, as the synchronized global economic recovery gathers a head of steam.

Most major economies are experiencing early- to mid-cycle characteristics


Sources: Capital Group, FactSet. GDP data as of 9/30/17. Country position within the business cycle are estimates by Capital Group economists.

Market Levels Suggest Better Opportunities Abroad

Most of the world‘s equity market indices achieved or neared multiyear highs in 2017, as investors set aside concerns about politics and focused on the broadening expansion. Market levels suggest that better investment opportunities may continue in non-U.S. markets.

Percentages of total world market capitalization and global GDP


Sources: Capital Group, FactSet, MSCI, RIMES. Market capitalization is each country or region's weight within MSCI ACWI as of 12/31/17. GDP is each country or region's percentage of total GDP of all countries included within MSCI ACWI as of 9/30/17.

U.S. Economic Engine Reaches Higher Gear

After more than 100 months of expansion, the U.S. economy appears to be in a period of self-sustaining equilibrium. The jobs market is solid, consumer confidence is soaring and retail sales growth is picking up.

The American economy is drawing from numerous sources of strength


Sources: U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics, Thomson Reuters. GDP growth is the annualized quarter-over-quarter growth in 3Q16 and 3Q17. Industrial production is the year-over-year change on 12/31/17 and 12/31/16. Retail sales growth is the year-over-year change on 12/31/17 and 12/31/16. Jobs added is the average monthly change in the payroll survey for the three months through 12/31/17 and 12/31/16. Manufacturing activity is the manufacturing component of the 12/31/17 and 12/31/16 ISM PMI reports.

Emerging Markets Have Only Just Begun Making Up Ground

The rally in emerging markets equities is more than 20 months old, with stocks up 76% since a trough in early 2016. Is the rebound getting long in the tooth? An expanding global economy, strengthening currencies and robust demand for technology-related components all bode well for emerging markets.

Until recently, emerging markets equities had trailed developed markets for several years

Emerging Markets vs. Developed Markets: Rolling 3-Year Returns



Sources: Capital Group, MSCI, RIMES. Data represents cumulative rolling three-year total returns of MSCI Emerging Markets Index versus the MSCI World Index through 12/31/17.

Get the Whole Story

Read our 2018 Outlook to learn more about the challenges and opportunities ahead for investors in the global economy.



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