Our Thinking

In this outlook, teams from across LGIM examine the opportunities and risks with which investors are presented in this context.

A once-fringe economic theory has been embraced by liberal politicians at the same time as traditional budget hawks have been in retreat. Its rise has potentially radical implications for inflation and investors.

As we look ahead to the next three months, and consider how to invest on behalf of our clients, we are confronted by seemingly conficting signals from depressed bond yields and exuberant equities.

Four practical steps DB pension schemes can take to help them navigate volatile markets.

Running RPI-linked assets versus CPI-linked liabilities can pose material risks. But as pension schemes become better hedged – and market pricing becomes more appealing – they may seek to explore CPI-linked assets in greater detail.

Managing transfers out of DB pension schemes.

Battery costs have declined rapidly in recent years, but the market is likely too optimistic about both the timeline for lower battery costs and what happens when we get there.

The global risk asset rally continued in early 2017, with emerging market investments the star performers.

There are so many elements to consider when building factor-based solutions it can be overwhelming. We’ve highlighted two case studies of investors tackling these challenges.

The economic expansion of the last decade has been a consistent tailwind for financial assets. We see next year as the start of the twilight zone between expansion and an eventual downturn that will likely mark the end of the cycle.

Cleaning up the world’s plastic waste will be a monumental effort – one which will have major implications for petrochemical companies and the long-term demand for oil.

Investors have been buffeted by a large number of negative headlines in 2018. We remain of the view that tightening global liquidity conditions are likely to exacerbate market volatility.

Can cyclical tailwinds paper over the structural cracks? And what’s the outlook for global trade, China and equity investors?

While trade tensions have escalated in recent months, we believe the case for emerging markets remains compelling - if investors know where to look.

Many investors combine concerns over overcrowding in factors with capacity fears. We want to help separate these terms and provide some clarity over the current state of factors.

We expect another strong year for growth with the global economy firing on almost all cylinders. But the market has priced in this optimism, implying greater vulnerability for disappointment. We expect the low interest rate environment to continue into 2018. While interest rates can drift up, we do not think this is the beginning of the end for the bond markets.

The consequences of monetary tightening will define the 2018 investment landscape.

A lack of policy space means that central banks may have to turn to more unconventional responses when the next recession occurs.

The retirement of baby boomers is having a negative impact on economic growth. This is bad news for the return on risky assets and applies downward pressure on interest rates.

Peak oil demand is a contentious topic. It is crucial for climate change, yet there are possible negative downsides such as volatile oil equity prices and corporate bond defaults.

The enthusiasm and excitement of a new technology has on many occasions captured the imagination of the supposedly hard-nosed investment community, and encouraged them to overstate its profit potential.

What is a fallen angel? In theological terms, a fallen angel is one who has rebelled and been exiled from heaven.

Investors currently buying UK government bonds are doing so in the knowledge that they are accepting a yield which is lower than the rate of inflation, i.e. the real yield.

In a surprising result, the general election has ended in a hung parliament. At the time of writing, the Conservative party has won approximately 318 seats.

Our forecast of a long-term structural shift away from coal could have dramatic implications for investors.

The logistics industry is seeing increased investment, driven by technology trends including automation and smart manufacturing.

The DC pensions industry has moved forward since auto-enrolment was introduced, with many more saving into a pension. This is great news, but challenges remain. How do we help individuals see the value in saving more for a future that seems a long way off?