Market Perspectives: Five-Year Outlook

Strategic asset allocation: over- and under-emphasis tables

strategic asset allocation five year outlook 2018-2023 banner

To help us prepare for changes in the economic landscape or global markets, our investment teams look at many sources of analytical data, listen to our experts within BMO Global Asset Management as well as the opinions of other industry leaders.

Key indicators that could shift portfolio positioning

A change in inflation or global earnings growth could force investors to shift towards a more conservative approach.
 
Listen to the full episode here.

From this we create a set of possible scenarios for the future. We “shake the tree”, challenging our own, our colleagues’ and our peers’ views. We try to anticipate how a realistic set of events could unfold over time, and also consider some of the extreme outcomes of these events – both positive and negative.

Our scenarios contain forward-looking statements identified by the use of terminology such as “may,” “should,” “expect,” “anticipate,” “outlook,” “project,” “estimate,” “intend,” “continue” or “believe”. Investors should not place undue reliance on such returns and statements, as actual returns and results could differ materially due to various risks and uncertainties, and this material does not constitute investment advice.

Although nothing is certain, against each scenario we assign a probability that reflects the likelihood that we believe it will happen, given a variety of political and economic factors occurring over the next five years.

This in turn gives us a framework to challenge our existing strategies to ensure we are as prepared as possible. It enables us to consider what might happen – and look at the impact on various asset classes. We consider what to over- or under-emphasize across our investment portfolios for each of the scenarios.

It means we can face the future with increased confidence, knowing that we have considered what might be on the horizon as well as over the horizon.

The views and opinions expressed below reflect potential approaches to asset allocation in line with our responsibility as steward of our clients’ capital. They are held at the time of preparation, are subject to change at any time and may not necessarily indicate current portfolios’ composition.

2018-2023 Five Year Outlook Strategic Asset Allocation final 750

 

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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.
 
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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.

 


 

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