Outlook 2016: A.D.A.P.T. to a changing landscape

Standard Chartered’s Wealth Management Advisory Group today released its investment framework for 2016 that captures the key market forces currently at play.

Against a backdrop of the U.S. economy’s continued recovery over the next 18 to 24 months, rising volatility and the potential for other recent financial market trends to stabilise or reverse, investors need to be ready to make tactical changes to their investment allocations. The A.D.A.P.T theme is based on the following insights:

• Advanced economies are at different stages of the economic cycle: U.S. expansion is maturing, but consumer spending will drive growth in 2016; Europe and Japan, on the other hand, are in the middle of the cycle.
• Deflationary pressures are expected to abate due to gradually tightening labour markets and bottoming oil prices.
• Asia and Emerging Markets are still dependent on China, which is transitioning towards consumer-led growth. Oil prices will also be key for Emerging Markets in 2016.
• Transition to late cycle in the U.S. economy will likely to lead to higher volatility.

Steve Brice, Chief Investment Strategist, Standard Chartered Bank, said: “The key input to investment decisions next year is where we are in the U.S. economic cycle. If you believe we will see a recession in 2016, then naturally you would have a defensive investment stance. However, we believe the U.S. economic expansion can continue well into 2017. This means global equities are likely to post positive returns in 2016 and outperform other asset classes. Within this, we prefer Euro area (currency-hedged) and Japan equities.”

With a relatively positive global outlook supported by a modest acceleration in Europe and Japan and stronger growth in India, investors who respond quickly to changes in the investment landscape will be able to seize opportunities in the bullish global equities markets.

Alexis Calla, Global Head of Investment Strategy and Advisory, Standard Chartered Bank, noted: “Volatility in the asset markets need not always be viewed negatively. Investors need to balance the risks of not investing in the generally well-performing equity markets against the risk of significant drawdowns.”

He added: “In 2015, our W.I.D.E.N. investment framework allowed our clients to navigate a very challenging environment. With 2016’s A.D.A.P.T. framework, we continue to focus on diversified income investing, with a gradual increase in allocation to bonds and alternatives as we move through the year.”

For further information please contact:

Josephine Wong
Manager, Commercial & Private Banking Communications
Standard Chartered Bank
+65 6596 4690
josephine.wong@sc.com