Protectionism, Monetary Policy Shifts and a Focus on Fiscal Policy to Impact Well-Established Investment Beliefs.

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STT , today released its global market outlook and key investment themes for In the report, SSGA points to being another year with top-down global, political and policy developments that will have an outsized impact on investment returns. In our view, some of the leading themes that have served investors well over the past several years are shifting in the face of a changing investment backdrop. Investors will need to consider areas of the market that will benefit or suffer from a possible reflationary environment, altering, for example, the search for yield.

The UK is delaying its planned return to budget surplus following the EU referendum result.

Canada and Japan are introducing stimulus packages. China is using targeted fiscal measures to help cushion growth and transition to a more consumer-driven economy. And President-elect Trump's proposals for tax cuts and additional infrastructure spending could potentially boost US growth to near 3.

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There remains a very strong incentive for EU officials to do whatever it takes to maintain the monetary union. Proposed global trading agreements are losing support across all markets and the incoming US presidential administration opposes the nation Trans Pacific Partnership.

Moreover, the number of protectionist trade measures imposed globally in is five times as many as through the same period last year. After years of unconventional monetary policy to combat stubbornly low growth and inflation, the US is cautiously proceeding with rate normalization, while central banks in Europe and Japan have shown some hesitation to extend negative interest rates and asset purchase programs.

Translating rhetoric into action around fiscal expansion and infrastructure spending could spawn a virtuous cycle of increased spending, rising confidence, and perhaps re-ignition of the US as the global economic engine. At the same time, faster inflation and rising interest rates will put pressure on bonds.

In the quest for equity growth, SSGA believes investors should be particularly thoughtful about which sectors they choose, as certain areas of the market have been bid up to uncomfortably high valuations. Some investors may need to diversify to allocations that could benefit from a rising rate environment.

For those seeking yield, the evolving profile of bond and equity markets will demand a more nuanced and cautious approach.

As such, investors should revisit their volatility management and currency hedging strategies. Tail risk hedging, dynamic or tactical overlays that deliver alpha or reduce risk, or other diversifiers can help to prepare for the uncertain environment ahead.

For nearly four decades, State Street Global Advisors has been committed to helping financial professionals and those who rely on them achieve their investment objectives. We partner with institutions and financial professionals to help them reach their goals through a rigorous, research-driven process spanning both active and index disciplines.

We take pride in working closely with our clients to develop precise investment strategies, including our pioneering family of SPDR ETFs. State Street Global Advisors is the investment management arm of State Street Corporation.

Investing involves risk, including the risk of 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.

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.

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