According to a global risk survey of 146 economists conducted in November last year by Bloomberg and Deutsche WM, nearly 40% of respondents think US president Donald Trump’s foreign policy will be the biggest threat to global markets.
It’s tightly followed by elections in Europe – namely the Netherlands general election in March, France presidential election around April and May, and Germany’s general election in autumn.
Putin’s foreign policy is ranked third. It is followed by Brexit, a possible global cyberwar and China’s leadership reshuffle (in October 2017).
Deutsche Bank WM global CIO Christian Nolting said in a recent briefing in Hong Kong that a global “cyberwar” has appeared on the risk list for the first time.
Cybersecurity, he said, is therefore an “interesting investment theme”.
The US is expected to spend $19bn on cyber security this year, up 35% from 2016, according to Nolting. “More companies might also be ready to invest more in cybersecurity on the private side, such as [secuirty for] mobile phones,” he noted.
“However, we don’t have a massive global player in the market yet, like the ones we see in the internet sector. What that means is more spending in that space will lead to development of global players through mergers and acquisitions activities.
“It makes sense to invest in a basket of companies”, including some in the US, Russia and emerging markets such as China, he continued.
Dividends in the spotlight
In broader equities, he believes the markets will focus less on central bank actions and more on individual companies and their earnings.
“Dividends play a more important role this year than they have been in the past year. There are massive flows into dividend funds [globally].”
Source: Deutsche WM, Bloomberg, FactSet
Nolting pointed out that investors should pay attention to the biggest sector weighting for each benchmark index for different regions.
“For Europe, the most important contributor to 2017 earnings growth is likely to be financials, in the US it is likely to be energy, in Japan probably industrials.”
“Many investors will be surprised, as the biggest sector [in the MSCI Emerging Markets Index] is not commodities but technology,” he noted.
The bank prefers US and Japan equities, against the backdrop of a strong US dollar.