By Raghu Suryanarayanan, Multi-Asset Research, MSCI
A year that was marked by the United Kingdom's vote to leave the European Union and the United States' surprise election of Donald J. Trump as president is ending with policy and geopolitical uncertainty emanating from both sides of the Atlantic that could impact economies, markets and portfolios globally. How can institutional investors address unconventional monetary and fiscal policies worldwide?
The key trends:
Yields on government debt in the U.S. have increased since the election, reflecting market expectations of higher inflation in anticipation of a fiscal boost that could increase government borrowing. Investors are confronting uncertainty about the nature of complementary fiscal interventions, a rise in systemic and geopolitical risk stemming from fragile banks in Europe, an increase in protectionist sentiment, the prospect of increased borrowing in the U.S. and Europe, and questions about the health of China's corporate-debt and property markets.