SSGA Expects Continued Market Volatility and GeoPolitical Uncertainty Throughout 2016
Lower-for-Longer Growth Expectations and Return of Volatility a Challenge to All Investors
State Street Global Advisors (SSGA) the asset management business of State Street Corporation (NYSE: STT), today released its
six month check-up on the 2016 market outlook and key investment themes.
In the wake of the Brexit vote in the UK, SSGA’s Global Market Outlook for the second half of the year urges investors to think
differently about their investment strategies to confront the challenges ahead, and emphasizes the need for defensive strategies to
help weather volatile markets. Investors may also want to consider re-engineering core exposures to target better risk-adjusted
returns amid a persistent low-growth environment.
“We expect that spikes in volatility triggered by a range of geopolitical factors will continue to characterize markets for the
remainder of the year,” said Rick Lacaille, SSGA’s global chief investment officer. “The Brexit vote outcome will be a primary
source of volatility, particularly in the short term, but also in the coming months as the process unfolds. Longer term, volatility
is likely to remain a feature of markets as they contend with broader global growth concerns, the capacity of central banks to
stimulate economies and other geopolitical events including elections in the US and across Europe.”
Mastering Volatility
SSGA notes that investors may want to consider volatility strategies that limit downside risk but allow them to potentially
participate in upside risk. Managed or low volatility strategies continue to hold promise, and alternatively, target volatility
triggers can provide a capped volatility level in portfolios.
“We began the year predicting that political uncertainty and structural factors meant that volatility would be a market feature
for some time,” said Lori Heinel, SSGA’s chief portfolio strategist. “This has proven true over the first half of 2016 and may
likely continue through the rest of the year. As ever, the best time to take out insurance is before you need it.”
Projections Downgraded for US Interest Rates
After raising rates in December 2015 for the first time since 2006, the Federal Reserve has been unable to follow up on its
initial hike due to weakness in some US data and uncertainty about economic conditions abroad.
“We now anticipate just one rate hike this year, most likely in December. Moreover, we think the risks around the hikes
projected in the Fed’s dot diagram for next year are skewed to lower for longer,” said Christopher Probyn, SSGA’s chief economist.
“Because of the current asymmetries in monetary policy, the Fed has limited ammunition to respond to a downside surprise and is
therefore keen not to make the mistake of tightening too much too soon.”
“Overall, we believe the low-growth environment we were preparing for has indeed persisted, and that means investors need to
either recalibrate their return objectives or be prepared to take on far more risk and complexity,” concluded Lacaille. “We
continue to advocate revisiting allocations, integrating factor exposures to boost returns where possible and uncovering new and
efficient forms of alpha generation. Diversifying across a number of factors to squeeze more out of the portfolio remains an
attractive approach.”
The full Global Market Outlook report for the second half of 2016 can be found here.
For further insight into some of the immediate and longer-term impacts of Brexit for global investment markets, click here.
About State Street Global Advisors
For nearly four decades, State Street Global Advisors has been committed to helping our clients, and those who rely on them,
achieve financial security. We partner with many of the world’s largest, most sophisticated investors and financial intermediaries
to help them reach their goals through a rigorous, research-driven investment process spanning both indexing and active
disciplines. With trillions* in assets, our scale and global reach offer clients access to markets, geographies and asset classes,
and allow us to deliver thoughtful insights and innovative solutions.
State Street Global Advisors is the investment management arm of State Street Corporation.
*Assets under management were $2 trillion as of March 31, 2016. AUM reflects approx. $32.6B (as of 3/31/2016) with
respect to which State Street Global Markets, LLC (SSGM) serves as marketing agent; SSGM and State Street Global Advisors are
affiliated.
Important Information:
Investing involves risk including the loss of principal.
This document may contain certain statements deemed to be forward-looking statements. All statements, other than historical
facts, contained within this document that address activities, events or developments that SSGA expects, believes or anticipates
will or may occur in the future are forward-looking statements. These statements are based on certain assumptions and analyses made
by SSGA in light of its experience and perception of historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances, many of which are detailed herein. Such statements are subject to a
number of assumptions, risks, uncertainties, many of which are beyond SSGA’s control. Please note that any such statements are not
guarantees of any future performance and that actual results or developments may differ materially from those projected in the
forward-looking statements.
The information provided does not constitute investment advice and it should not be relied on as such. It should not be
considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment
objectives, strategies, tax status or investment horizon. You should consult your tax and financial advisor.
All material has been obtained from sources believed to be reliable. There is no representation or warranty as to the accuracy
of the information and State Street shall have no liability for decisions based on such information.
State Street Corporation, One Lincoln Street, Boston, MA 02111-2900
Web: www.statestreet.com
© 2016 State Street Corporation - All Rights Reserved
CORP-2061
Exp. Date: 07/31/17
State Street Corporation
Andrew Hopkins, +1 617-664-2422
Ahopkins2@StateStreet.com
View source version on businesswire.com: http://www.businesswire.com/news/home/20160712005470/en/