(pictured: Barry McInerney)
BMO Global Asset Management has published its annual five-year outlook for markets, including an analysis of three key “actionable” investment scenarios. The most likely tips a broadening of economic growth from the US to Europe and Japan.
BMO GAM has placed a 60 per cent chance on the benign view which envisages relatively low energy prices, inflation and interest rates. While the US economy will continue to be a catalyst for global economic growth, Japan, Europe, China and India will contribute as well, the report says.
The resulting investment implications are primarily fuelled by the premise of a widening global economic recovery and the effects of continued low oil prices. They include an overweighting to equities relative to fixed income and to attractive investing opportunities within emerging markets – especially India and commodity-importing countries.
An even better scenario, to which BMO GAM assigns a 20 per cent chance of playing out, involves more upside surprise. This envisages a situation where policymakers around the globe get nearly everything right, both in the short and intermediate term.
The report states that the resulting investment implications of this scenario are best captured by a full risk-on asset class exposure, focusing on cyclical sector equities and non-US companies with high, domestically generated revenues – particularly among commodity producers.
The third scenario, which is also assigned a 20 per cent chance, deals with the possibility that one or more policy errors result in a surprise slowdown in the world’s economy.
The report notes that, given the number of consequential policies being contemplated and the number of central banks contemplating them, there will be many opportunities for miscues.
Potential investment implications of the downside scenario centre on the flight of money to quality and safety. This includes long-dated US treasuries and large-cap equities from core European countries – such as Germany and the Netherlands – as well as the US.
Barry McInerney, BMO GAM’s co-chief executive, says the third annual five-year outlook represents views expressed at the firm’s ‘global investment forum’. “Within the most likely scenario we’ve identified, we expect global economic growth, which has currently been centered in the US to broaden, particularly to Europe and Japan.”
Meanwhile, in Australia, BMO GAM has appointed Jonathan Goll to the role of director of institutional business, based in Sydney. Goll most recently spent 11 years at GMO in both the US and Singapore. He is also a former asset consultant with the old Towers Perrin in Australia.
Goll reports to Ravi Sriskandarajah, who was last year promoted from Sydney to Hong Kong as managing director and head of BMO GAM for the Asia Pacific region.