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

Insights

ARTICLES  |  MARCH 2018

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

chart-big-pic-cycle-CIAM-1170x544

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

chart-big-pic-market-capitalization-CIAM-1208x406

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

chart-template-1170x418

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

 

chart-em-composition-585x229

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.

 

 


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Unless otherwise indicated, the investment professionals featured do not manage Capital Group‘s Canadian mutual funds.

References to particular companies or securities, if any, are included for informational or illustrative purposes only and should not be considered as an endorsement by Capital Group. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any investment funds or current holdings of any investment funds. These views should not be considered as investment advice nor should they be considered a recommendation to buy or sell.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not be comprehensive or to provide advice. For informational purposes only; not intended to provide tax, legal or financial advice. We assume no liability for any inaccurate, delayed or incomplete information, nor for any actions taken in reliance thereon. The information contained herein has been supplied without verification by us and may be subject to change. Capital Group funds are available in Canada through registered dealers. For more information, please consult your financial and tax advisors for your individual situation.

Forward-looking statements are not guarantees of future performance, and actual events and results could differ materially from those expressed or implied in any forward-looking statements made herein. We encourage you to consider these and other factors carefully before making any investment decisions and we urge you to avoid placing undue reliance on forward-looking statements.

The S&P 500 Composite Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2020 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC.

FTSE source: London Stock Exchange Group plc and its group undertakings (collectively, the "LSE Group"). © LSE Group 2020. FTSE Russell is a trading name of certain of the LSE Group companies. "FTSE®" is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under licence. All rights in the FTSE Russell indices or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indices or data and no party may rely on any indices or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication. The index is unmanaged and cannot be invested in directly.

Bloomberg® is a trademark of Bloomberg Finance L.P. (collectively with its affiliates, "Bloomberg"). Barclays® is a trademark of Barclays Bank Plc (collectively with its affiliates, "Barclays"), used under licence. Neither Bloomberg nor Barclays approves or endorses this material, guarantees the accuracy or completeness of any information herein and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

MSCI does not approve, review or produce reports published on this site, makes no express or implied warranties or representations and is not liable whatsoever for any data represented. You may not redistribute MSCI data or use it as a basis for other indices or investment products.

Capital believes the software and information from FactSet to be reliable. However, Capital cannot be responsible for inaccuracies, incomplete information or updating of the information furnished by FactSet. The information provided in this report is meant to give you an approximate account of the fund/manager's characteristics for the specified date. This information is not indicative of future Capital investment decisions and is not used as part of our investment decision-making process.

Indices are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.

All Capital Group trademarks are owned by The Capital Group Companies, Inc. or an affiliated company in Canada, the U.S. and other countries. All other company names mentioned are the property of their respective companies.

Capital Group funds and Capital International Asset Management (Canada), Inc. are part of Capital Group, a global investment management firm originating in Los Angeles, California in 1931. The Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

The Capital Group funds offered on this website are available only to Canadian residents.


Related Insights


 


Related Capital Group Funds (Canada)