“Elsewhere, we see more modest changes, including a small acceleration in Europe and Japan. That said, we expect above-trend GDP growth in Europe through to 2019.”
“Our economists also expect US interest rates to rise faster and peak at a higher level than current forwards imply. Rising US rate expectations should push US bond yields higher. Market-implied inflation expectations seem too low for both the US and Europe according to our bond strategists.”
“This combination should push the USD higher; we continue to expect USD strength versus the EUR, however the ECB meeting did not show the commitment to extending QE that we and the market had expected. Given this, our FX strategists have put their targets under review. A weaker EUR, even if it’s not as weak as we had previously forecast, should help boost returns in local currencies and also help companies with high USD revenues.”
“Our key themes for 2016 are: 1) Commodity differentiation; a more positive view on Oil stocks, but we remain negative on Basic Materials; 2) Industrial differentiation; a more positive view on opex-facing companies while we remain negative on capex-facing; 3) Consumer differentiation; a positive view on Consumer Cyclicals but we remain negative on Consumer Staples, and a positive view on European cyclical recovery via our basket (GSSTEUGR); 4) Income differentiation; negative on defensive yield and positive on yield plus growth (we recommend our basket GSSTHIDY), and 5) EM differentiation; stay positive on EM consumer vs. EM industrial exposure (GSSTBRCC vs. GSSTBRCI).”
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