The outlook for investment markets in 2018 remains positive but investors should remain on full alert and focus on the fundamentals, according to Legg Mason.
The firm’s “Outlook 2018 report” stressed that the expansion has yet to provoke a major uptick in inflation which was expected to average 1.7 per cent in advanced economies before converging on two per cent over the medium term, as according to the International Monetary Fund.
Legg Mason’s head in Australia, Andy Sowerby said that although 2018 would see a rather positive investment environment, the investors should not adapt the ‘rising tide’ philosophy.
“On the contrary, given current valuations gains, this year could well require the kind of selective approach to sectors and securities that is practiced by active managers,” he said.
“The report states that economic conditions appear positive in nearly all regions – the first time that global growth has been this synchronised since 2011, with no major economies mired in recession.
“The benign scenario reflects in part the finesse major central banks have shown in gauging the pace of recovery and effectively communicating their planned monetary policy changes to financial markets.”
Other key take-outs from the report were a move from a low-growth, low-inflation environment to the so-called “Goldilocks” scenario of higher growth and low inflation, positive developments in China following its attempts to tame the country’s bond market and its increased integration with the global financial system.
