This year was full of significant changes around the world, from the Brexit referendum to the midyear turn in interest rates, to the election of Donald Trump for president in the U.S.
“At first blush, you’d think this would call for major changes in our economic and capital market outlook,” David Lafferty, senior vice president and chief market strategist at Natixis Global Asset Management, writes in his Capital Market Notes.
However, most of the trends that Lafferty anticipated have either continued or been confirmed by events in 2016.
“Our broadest views for some time now have been that the global economy was slowly gaining traction, that this would lead to modestly higher corporate earnings and stock prices, and put some upward pressure on interest rates, thus detracting from bond returns,” Lafferty writes.
While most developed economies languished with positive but subpar growth in 2016, Lafferty believes 2017 will provide a bit more upside.
In spite of an improving global economy, Lafferty also expect investors’ patience to be tested in the coming year with an increased potential for major economic and market shocks.
“We have (and believe that investors should have) less confidence in almost every economic and market scenario going into 2017,” Lafferty writes.
Here are four risks or uncertainties that Lafferty will be watching in 2017:
1. The Republican clean sweep in the U.S. Congress has allowed the market to price an extreme level of optimism into a Trump presidency, according to Lafferty.