In volatile market, stock-picking is key

THE year 2016 for the US and Europe is likely to be characterised by an absence of momentum in economic and corporate earnings growth, concerns about the monetary tightening cycle in the US, and consequently subdued returns and elevated volatility in equity markets. In this context, a tactical investment approach and stock-picking will be key.

An important theme is the emergence of a technological innovation shock, driven mainly by US companies, which is already impacting corporate performance. Our approach for 2016 accordingly calls for different strategies between the US and Europe.

We can just about describe 2016 as a "Goldilocks" environment (not too hot, not too cold), but not a very appealing one. We expect global economic growth of 3.3 per cent, slightly better than in 2015. US real GDP growth will likely be around 2.3 per cent, little changed from 2.5 per cent in 2015. In Europe, we expect growth of around 1.8 per cent, up only slightly from an estimated 1.5 per cent in 2015.