GLOBAL ECONOMY ENTERS "GOLDILOCKS" PERIOD

(London, Zurich):Stronger global growth and returning inflation should continue to support risk assets, but is likely to lead to a more challenging environment for fixed income, according to the fourth-quarter House View from Aviva Investors.

Global GDP could rise to between 3.5 and 3.75 per cent this year and in 2018. Inflation is likely to hit two per cent by the middle of next year in the US, with a more gradual rise in the Eurozone and Japan.

With central banks starting to unwind a decade of extraordinary monetary policies, market volatility could rise from close to historical lows as correlations break down. The US Federal Reserve has raised rates four times and started to unwind its asset holdings, while the European Central Bank is expected to begin reducing quantitative easing at the start of 2018. Despite the uncertainty around Brexit, even the Bank of England has hinted it may raise rates soon.

Equities are likely to fare better than fixed income in this environment, with Eurozone and EM equities offering better relative value than US stocks. EM debt, both in local and hard currencies, currently offers more attractive opportunities than developed market sovereign and corporate debt.

Ian Pizer, Head of Investment Strategy at Aviva Investors, said:

"The threat of deflation has passed and inflation is slowly returning to levels close to central bank targets. Stronger growth has led to tighter labour markets, which is resulting in upward pressure on wages. Robust global growth will continue to support these trends, justifying central banks' decisions to start withdrawing stimulus or consider doing so. The global reflationary environment, alongside reduced central bank liquidity, will be supportive of risk assets but leaves global rates markets more challenged."

ENDS

For more information please contact:

Kirsten Duelli

Instinctif Partners

+41 44 280 11 88

kirsten.duelli@instinctif.com

Notes to Editors

IMPORTANT INFORMATION:

The information and opinions contained in this document are for use by the financial press and media only. No reliance may be placed for any purpose on the information or opinions contained in this document nor should they be seen as advice.

The press release is provided on the basis that Aviva Investors Global Services Limited is not causing the communication of a financial promotion under exemption of the Financial Promotion Order, as Aviva Investors Global Services Limited has no control over the way in which an article based on this press release is prepared and published by the financial press and media.

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited ("Aviva Investors") as at x September 2017. Unless stated otherwise any views, opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. Past performance is not an indicator for future returns.The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.

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Aviva Investors

Aviva Investors is the global asset management business of Aviva plc. The business delivers investment management solutions, services and client-driven performance to clients worldwide. Aviva Investors operates in 15 countries in Asia Pacific, Europe, North America and the United Kingdom with assets under management of £351 billion as at 30 June 2017.


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Q4 House View Media Release (PDF)
Photo Ian Pizer (JPEG)



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