For investors 2016 was a year of hope, while 2017 will be a year of delivery. One year ago, the consensus was that we had avoided another financial crisis but our expectations were modest, expecting a deflationary lower-for-longer environment. The pendulum has since made a full swing to euphoria and hopes of a panacea from Trump reflation. The truth is somewhere in the middle.
The global cyclical outlook has led to lower macro tail-risks. Many of the structural growth areas have already gone through a period of underperformance in light of the hope rally, making them relatively more attractive from the risk-return point of view. As these companies continue to deliver resilient earnings, we believe the market will return to fundamentals in 2017 and reward those that can deliver solid results.