In the main, the long-term outlooks for both global and domestic equity markets are solid. Global growth forecasts will continue to increase steadily over the next few years, but in the short term, markets have priced in earnings upgrades and US corporate tax cuts, which are both EPS accretive.
The recovery in emerging markets will continue to follow recent US market strength. Higher US liabilities may remain structural issues for some markets but forecasts for emerging market and developing economies continue to outpace advanced economies, with China’s structural growth story just beginning. The market will continue to second guess China’s growth rate but with a GDP per capita of less than $10,000, it still has a long way to go to catch up to world leader US’s GDP per capita of nearly $60,000.
Chart 1: Per Capita GDP. China is the second largest economy globally but will continue to grow their middle class. Structural growth for China to continue for the decade ahead.