Investing for 2017 and beyond

Contributed by Florence Tan, head of advisory, strategy and multi-channel communications, Asia-Pacific, Citibank

Malcolm X said, “Tomorrow belongs only to the people who prepare for it today”, and while he was referring to the importance of education, the same can be said about investing. Investors who are able to spot trends in advance and position their portfolios accordingly can be handsomely rewarded for their efforts.

Here are some key themes that investors should consider in 2017.

More active fiscal policies 

Expansionary fiscal measures are expected to feature more significantly in global policy decisions in 2017. As doubts rise over the ability of monetary policy to stimulate growth, policymakers are likely to experience greater pressure to increase spending. This year, a number of central banks, including the European Central Bank and the Federal Reserve, have called for more active fiscal policy. While these calls have gone unheeded, years of below-trend growth have lowered living standards and raised voter dissatisfaction. Political pressures could spur improved co-ordination of monetary and fiscal policies in the year ahead. A stronger growth impulse is likely to be positive for earnings and equities while raising bond yields. However, the risk is that governments may need to experience more economic pain before they act. Until then, lower-risk assets including bonds and other safe-haven instruments are likely to continue to perform well.

Continued disruption

Amid slow growth and narrowing margins in multiple industries, the fight for market dominance continues to intensify. Technological advances have contributed to this disruption. One obvious example is the challenge shale-oil producers now pose to OPEC countries in oil production. In other industries, such as retail and finance, internet companies have shown that their edge in using technology and big data makes them a force to contend with. Technology will continue to change the way business is conducted in multiple industries. In health care, for example, there are opportunities for technology to change how patients, physicians and hospitals interact, reducing costs and increasing efficiency. More generally, corporate strategies will need to incorporate mobility. Technology companies that can take advantage of these trends are likely to be well positioned for the future.

A new reality

While the concept of virtual reality (VR) was born as early as the 1960s, most consumers have yet to experience wearing a headset. Augmented reality (AR), which blends digital images with the real world, recently experienced greater success only after “Pokémon Go” became a viral phenomenon. Momentum appears to be picking up, with usage going beyond gaming. Newspapers are experimenting with different formats via immersive journalism. There is also the potential to leverage VR and AR as educational tools, letting users immerse themselves in different situations or embark on virtual tours. The VR and AR markets will grow rapidly across a range of applications including entertainment, vehicle navigation, lifestyle information and a variety of work situations. These new spheres of technology are likely to have a major impact on the future of e-commerce and mobile commerce, whose value is estimated at $3 trillion annually. While companies that develop hardware may benefit in the near term, software companies that develop VR and AR applications are likely to benefit more in the longer term.

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