The Way Forward2018 Global Investment Outlook

Our investment managers from around the world give their perspective on markets, asset classes, and the possible shape of things to come.

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Inside the Outlook

Our boutique managers are known for independent thinking and, at times, contrarian views. Below is a by the numbers taste of what's come up in Outlook commentaries — recurring themes that can cascade to investors everywhere.

Changing consumer habits offer opportunityToday consumers spend less on wearables, more on entertainment.

28
Clothing and footwear
10
Clothing and footwear
41
Experiences
65
Experiences

Clothing and footwear

Experiences

Source: US Bureau of Economic Analysis, Wells Fargo Securities

From ecommerce to dining out, to big spending on big-ticket items, the way consumers spend has changed dramatically. One example: US consumers' penchant for buying “experiences,” including entertainment and leisure, now dwarfs the amount of discretionary income spent on essentials like clothing and footwear. The reversal over decades is dramatic. And we haven't even mentioned the impact of online shopping.

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Energy is a catalystAs demand rises among consumers, energy sources evolve.

Rising energy demand (global middle class growth)

Rising energy demand
2016
By 2028
0
0

Worldwide consumption of liquefied natural gas (LNG)

Worldwide consumption of liquefied natural gas
2016
By 2040
0
0

Clean fuels usage surpasses coal

Renewable energy sources
Renewables and LNG by 2040
Coal by 2040
0
0

1Source: The Brookings Institute, BP, Royal Dutch Shell, US Energy Information Association.

Liquefied natural gas. Renewables. Electric vehicles. Biomass. Fracking. With 160 million people entering the global middle class annually, energy is fundamental to rising standards of living.1 Energy innovation is driving capital-intensive investments by both public and private sources, moving markets worldwide.

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For rate hikes, time may be upIs the cycle for higher interest rates nearly over?

24
For rate hikes, time may be up
13+
For rate hikes, time may be up
9
For rate hikes, time may be up
24
For rate hikes, time may be up

2Source: Federal Reserve Bank of New York.

When the US Federal Reserve is in a cycle of raising interest rates, on average it takes it about 13 months to stop.2 The current cycle began two years ago. So to investors now bracing for lofty rates, we say: This time may be different.

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Europe is attractiveImproving macro picture for the 19-country euro area.

GDP (gross domestic product)

GDP
July 2016
September 2015
0
0

Jobless rate

Jobless rate
July 2017
April 2013
0
0

Industrial production

Industrial production
Up, 2016-2017
Down, 2015-2016
0
0

Source: Eurostat. Industrial production data are from July to July in each year noted.

Instead of the US as the big economic story, the euro zone has been booming — especially compared with how it fared after the financial crisis. Some structural issues remain in individual countries, however. France is fighting deficits, for example, and Spain’s unemployment rate is still painful at 17%.

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Digitalization is driving everything

18
Internet connectivity
26
Internet connectivity
$800
Autonomous vehicles
$7
Autonomous vehicles
30
Artificial intelligence
4
Artificial intelligence

Internet connectivityNumber of connected devices

Autonomous vehiclesProjected economic opportunity

Artificial intelligenceImage recognition error rate

Sources: Internet connectivity — Statista, IHS Market, 2017; Autonomous vehicles — Strategy Analytics, Intel, 2017; Artificial intelligence — Harvard Business Review, 2017.

Digital technologies are transforming businesses, remolding industries, and simply changing the way people think and create opportunity. Of the world's top 30 to 50 transformative technologies, here are 3 with massive potential impact that can drive investments in many areas.

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The year ahead

With many of the world's stock markets on multiyear bull runs, our equity investors on four continents explore which areas might offer pockets of opportunity around the globe.

Forces from digitalization and demographics to government debt are shaping new mindsets among investors. Our fixed income team based in Philadelphia, Sydney, and London explores how much has really changed for global fixed income investors.

Explore specialist outlooks in energy, real estate, agriculture, and infrastructure, where ongoing interest in alternative investment opportunities continues to drive capital investments.

Alternatives

About the authors

Equity

11 investment professionals contributed

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Fixed income

18 investment professionals contributed

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Alternatives

12 investment professionals contributed

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