21 Dec Fixed Income Perspectives – ‘Looking Ahead to 2017’
Voya Investment Management – Fixed Income Perspectives – December 2016
As 2016 comes to a close, we would like to look ahead to what should be another eventful year in 2017. With the Donald Trump administration set to be sworn into office in a matter of weeks, changes are most certainly on the horizon. Looking domestically, we believe the expectations of tax cuts, deregulation and fiscal policy will result in near-term acceleration of economic growth in the United States. This increase in incrementally higher nominal growth will likely lead to improved corporate revenues and earnings, creating a constructive environment for corporate credit and supporting tighter spreads.
Globally, near-term cyclical tailwinds and easier fiscal policies should reduce the need to rely so heavily on global monetary policy accommodation. From a policy standpoint, the European Central Bank (ECB) is near the end of viable options and will begin stepping away from existing measures.
Continuing to look abroad, we expect green shoots within emerging markets to take root, facilitated by developed market stability and local structural reforms. We believe these opportunities will take hold despite the headwinds of an incrementally stronger U.S. dollar and higher global interest rates.
Against this backdrop, we continue to favour U.S.-centric risk, while opportunities may present themselves within emerging markets .