Global weekly: Navigating expectations

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Yesterday, after the European Central Bank (ECB) announced adjustments to its monetary policy that were less than expected, markets were disappointed. Bond yields rose, equity markets fell and the euro surged.

Our Investment Outlook 2016, Navigating Expectations, identifies how investors have become increasingly exposed to changing market expectations related to growth and policy actions. We recommend taking a pragmatic investment approach in 2016, with an emphasis on spotting trend reversals and finding opportunities derived from the reward from risk.

For 2016, it means that while ABN AMRO’s investment policy is anchored to a positive medium-term economic scenario, it remains exposed to market fluctuations regarding growth and policy actions. In our Investment Outlook 2016, Navigating Expectations, we recommend steering a pragmatic course. Add equities (currently overweight) when the fears of recession recede, and reduce equities when market sentiment becomes too optimistic. Continue to avoid bond markets (underweight), except for the few segments offering returns over cash with reasonable risk. And use hedge funds (overweight) for diversification.

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