Global Investment Outlook: MIDYEAR 2016

BlackRock

Belinda Boa

Research

16 Pages

BlackRock Investment Institute examines how Brexit uncertainty, fading central bank influence, and tentative U.S. reflation were reshaping global markets in mid 2016. The paper argues investors may have “borrowed returns from the future,” while low rates, weak growth, and crowded positioning created rising volatility risks.

Key Takeaways

Reflation Base Effects: Oil stabilization alone could push U.S. inflation near 2.5% by early 2017, potentially reviving rate hike expectations and unsettling bond sensitive assets.
Emerging Markets Rebound: EM equities historically strengthened during weaker dollar periods, while investors chased hard currency EM debt as developed market sovereign yields moved below 1%.
Valuation Stretch Concerns: U.S. equities traded in the 72nd percentile of historical valuations, while S&P 500 returns exceeded nominal GDP and earnings growth since 2007.
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