2015 closed with a Federal rate hikes and more can be expected this year, probably twice more but central bank forecasts about four.
In line with this, Michael Stanes, Investment Director at Heartwood Investment Management, who says that there would be a "slightly better growth prospects" compared to last year as reported by Roger Aitken, Forbes' contributor.
Yield: A modest growth this year "does not kill the yield substitutes."
"The macro-economic picture might well continue to favour the so-called 'compounders', which are growth companies by another name but in many cases are not showing much growth and are clearly not cheap," Stanes contends.
Volatility: Volatity for financial markets should be expected for maturing cycle and rolling back of the central bank safety blanket.
Stanes says, "Performance dislocations, of course, provide potentially better entry points into the market. However, compared with 2015, investors might need to be more opportunistic in utilizing hedging strategies in protecting capital and providing more comfort in staying long in equities."
Liquidity continues to matter: The general concensus remains the 'gradual rate cycle' but it may be soon put to test by bond investors. What's higly valued is property, however.
Stanes argues, "In this market, investors will need to be mindful of liquidity risks, investor positioning and potential complacency around the Bank of England and rate cycle."
Inflation: Oil prices is settling to a range as "deflation pulse" begins to dessipate. Stanes further argues that, "Investors may consider indirect exposures to commodities, such as equities and credit, which arguably remain better risk-adjusted tools."
Policy divergence would still continue to play out. But how about US dollar/weak Euro and Japanese Yen, could it be expected this year? Stanes says, "overall this is unlikely, although we may continue to see a weak bias to those currencies."
Meanwhile, The Telegraph reports that tigthening may not happen until April due to the persistent low inflation and "concerning" economic outlook.
