A recession is not looming on the horizon, but returns for equities for the next six to 12 months will be blah, according to Natixis Investment Managers.

Seventeen market strategists from the firm and affiliated managers said returns for the rest of 2019 will be “more muted as markets grapple with a number of downside scenarios and little in the way of upside surprises.” The outlook was reported in Natixis’s “Midyear Strategist Survey” (completed before the market downturns this week).

David Lafferty, chief market strategist at Natixis, said, “We feel markets will grind a little higher, but advisors should be talking to clients about being a little more cautious. They should not get out of the market, but maybe they should not take as much risk.”

Advisors should be telling clients to emphasize value in their investments. “It is too late in the market cycle to be bullish, but it is too early to be bearish,” Lafferty said. For bonds, movement onto shorter duration might be advisable.

“Natixis strategists,” the report said, “are most bullish on U.S. sovereign bonds, followed by emerging market equities, global REITs and emerging market bonds of all types.

“The common thread running through these bullish forecasts is accommodative central bank policy and ample global liquidity. In turn, respondents are most bearish on cryptocurrencies, U.K. stocks, U.S. high yield and bank loans,” the report added.

The strategists predict little in the way of equity returns in the United States and the eurozone over the next six to 12 months, but neither are they forecasting dramatic losses. For fixed income, additional reductions in interest rates are predicted by both the Federal Reserve and the European Central Bank.

“The survey respondents have a general lack of enthusiasm for upside potential,” the report said. “Notably, few anticipate any positive Brexit scenarios, and while some hold hope that new central bank accommodations could drive a rebound in growth, just as many believe it is unlikely to work.

“More significantly, those surveyed did not foresee accelerating global growth or equity earnings in the next six to 12 months.”

Esty Dwek, the head of global market strategy, dynamic solutions at Natixis, said, “The survey results clearly show that, in aggregate, our respondents don’t see a lot of positive market catalysts on the horizon—nor do they see a recessionary worst-case scenario as very likely in the near term. It’s a kind of a ‘muddle through’ outlook.”

She added, “After a dismal end to 2018, equities and bonds rallied in the first half of 2019. Performance to date has been driven largely by the hopes of new rounds of central bank easing, but as what the market hoped for comes closer to reality, market strategists across the Natixis family find little to get excited about.”

“Perhaps the best news,” Dwek said, “is that despite projections for lackluster performance, they are not calling for a dramatic retreat from the impressive gains.”

First « 1 2 » Next