It has been a hectic year for investors, with the eurozone debacle driving core bond yields to record lows, while equity markets were buffeted by fears over China and the US.
Investors have been left with few options to protect cash and beat inflation, on the whole opting to go for safety over returns by snapping up record amounts of bonds from all over the globe.
However, as 2013 approaches, fund managers and economists say investment returns could come from some very different sources next year.
Below they highlight the five key investment questions facing investors.
1. Can the US avoid the fiscal cliff?
“Markets seem to be predicting Congress and the Obama Administration will be able to engineer some sort of short-term, stop-gap measures that delay or dull the immediate impact of the fiscal cliff, leaving many of the hard decisions on hold until next year.
BlackRock’s Bob Doll
2. Is this a new dawn for China?
“New leader Xi Jinping is still in the vein of Deng Xiaoping who led China towards a market economy in the eighties, but he could potentially be steering China towards a new leadership style.”
Schroders’ Virginie Maisonneuve
3. Are we seeing a rotation from bonds to equities?
Asset allocators have increased their exposure to equities for the fifth successive month while reducing bond positions, according to the November BofA Merrill Lynch Fund Manager Survey. A net 35% of respondents are overweight equities, compared with 25% in October.
4. Can Greece stay in the eurozone?
A conflict erupted between the IMF and European Union last week as it was announced Greece would receive a two year extension to meet its debt reduction target. Finance ministers will meet again on 20 November to agree the final details.
5. Could the UK lose its AAA rating?
Global credit ratings agency Moody’s warned the UK is at risk of losing its AAA status should the economy slide into a triple-dip recession. Its comments followed the BoE’s decision to slash its growth forecast for 2013 to 1%. A key date will be 5 December when Chancellor George Osborne releases his Autumn Statement.
But on the bright side…
Neptune founder and CEO Robin Geffen expects global growth to accelerate over the next six months. He believes the consensus views on prospects for China are too bearish and expects equities to re-rate.
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