Low Energy Prices Likely To Continue

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    There is a 60 per cent likelihood of relatively low energy prices, inflation, and interest rates over the next three to five years, says BMO Global Asset Management’s third annual ‘Five-Year Outlook.’ However, the U.S. economy will continue to be a catalyst for global economic growth and Japan, Europe, China, and India will contribute as well. The resulting investment implications are primarily fueled by the premise of a widening global economic recovery and the effects of continued low oil prices. They include an overweighting to equity relative to fixed income and to attractive investing opportunities within emerging markets ‒ especially India and commodity-importing countries. The upside-surprise scenario, to which it assigns a 20 per cent chance of playing out, envisions a situation where policymakers around the globe get nearly everything right, both in the short and intermediate term. The resulting investment implications of this scenario are best captured by a full ‘risk on” asset class exposure, focusing on cyclical sector equities and non-U.S. companies with high, domestically generated revenues ‒ particularly among commodity producers.