We believe that in 2017…
Still, it’s always fun to think about how reality in 2017 could diverge from expectations [and this article does just that].
Written by Kurt Reiman (BlackRockBlog.com)
…There was no clear winner in our recent poll of BlackRock strategists and portfolio managers on what the top surprises for 2017 might be, but worse-than-expected outcomes did gather the most votes. These included:
The three outcomes above would be surprises given consensus long positions in U.S. stocks and other economically sensitive assets, such as industrial commodities and corporate credit.
What could be the catalyst for some of these negative surprises? Central bank policy mistakes or faster-than-expected rises in interest rates and the U.S. dollar were on our list.
Investors have been increasingly anticipating an extension of the bull market and better nominal economic growth in 2017, with consensus for 2017 now squarely centered on reflationary outcomes. Moreover, exposures that could mitigate the risk of an unexpected downturn in stocks, the economy or China, such as defensive stock sectors and longer-maturity government bonds, are presently out of favor. These assets could stage a comeback in a risk-off scenario.
A growth breakout, finally?
Despite these concerns, we also entertained the notion that things could turn out surprisingly well-even better than our cautiously optimistic view on the outlook. One such surprise we discussed: If U.S. fiscal policy comes sooner or turns out to be more effective than expected.
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