Market Perspectives: Five-Year Outlook

Global Investment Forum: Five-Year Outlook

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Each year our Global Investment Forum (the ‘Forum’), attended by a group of BMO’s international investment leaders and strategists, gathers for two days of intensive briefing and debate stimulated by the input of independent experts. This year’s Global Investment Forum was held in Toronto from September 26-27, 2017.

In this year’s Forum, our discussion centered on a handful of topics and we debated their potential impact over the coming five-year period. Interestingly, we are seeing themes identified in previous Forums exercising their influence over the future investment environment as they continue to evolve and play out. Topics included:

  • Balancing act – whether policymakers could achieve and maintain the critical balance that delivers growth, addresses interest rate pressures and controls inflation in the face of unpredictable influences, including varying populist agendas and concerns that the threat of recession is once more a possibility.
  • Demographics and the supply of labor – this is becoming an important issue for some developed markets as the ‘baby boomer’ generation start to retire. Furthermore, a disaffected, less-skilled labor force is highlighting the so-called ‘inequality theme’, fueling a rise of extreme political movements and unexpected voting results.
  • Power of populism – we see this being exploited and manipulated by leaders across many regions. From the political gamesmanship of President Xi in China and Prime Minster Abe in Japan, to the public rhetoric and display of protectionism being expressed between President Trump and Kim Jong-un of Korea as well as European politicians facing Brexit, domestically focused agendas are being pushed at the cost of cross-border collaboration.
  • Rise of globalization as a monopoly power – this is growing within the corporate sector, at the cost of dynamism.
  • Innovator or disruptor? – as technology delivers productive solutions to ease the labor issues and push a new agenda in global energy use, we are seeing a cost to the traditional market leaders.

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Our Five-Year Outlook is a reflection of our commitment to add value through innovative ideas, solutions, support, and access to the insights of renowned global thought leaders.

 

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Better conversations. Better outcomes. podcast

Looking ahead: 2018 Five-Year Outlook

Jon Adams, Senior Investment Strategist & Portfolio Manager at BMO Global Asset Management, joins our latest episode of the Better conversations. Better outcomes. podcast to discuss the importance of the forum, the three scenarios that could drive markets in the next five years and what each could mean for investors and portfolio positioning.
 
Listen now

 


 

Our scenarios

Steady as she goes (60% probability)
Our base case scenario, in which we see the global economy continuing to enjoy steady growth with modest inflation, despite the slight headwinds created by the gradual withdrawal of quantitative easing and higher interest rates.
Policymakers pull the punchbowl (30% probability)
Our downside scenario, where we are concerned that there will be policy errors that could start the chain reaction that leads the U.S. and then the rest of the world into a recession.
Perfect policy prevails (10% probability)
Our upside scenario takes a look at what happens when the policies all go according to plan and the policymakers get it right.

 

Additional Five-Year Outlook resources

State of the world
The world economy has reached an unusual state of stability. Almost every country is seeing positive growth, but nowhere is growth booming out of control.
Back to basics: the Phillips curve
The Phillips curve posits a relationship between unemployment and wage or price inflation. The theory is that when unemployment falls below a certain level, wage and price inflation begin to accelerate.
Strategic asset allocation
View the investment implications on equities, fixed income, alternatives and currencies for all three of our scenarios in our over- and under-emphasis table.

 


 

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