DENVER, Jan. 04, 2017 (GLOBE NEWSWIRE) -- Janus Capital Group released Janus Market GPSTM 2017, an investment outlook for 2017, addressing key themes such as China’s transition from a manufacturing and export-led economy, inflation, low growth, energy, and innovation in technology, industrials and health care.
The report features commentary on 2017’s most pressing issues from Janus Capital Group's foremost investing experts, including Myron Scholes, Ash Alankar, George Maris, Carmel Wellso, Bill Gross, Brad Slingerlend, Andy Acker and many more.
The report is available on the Janus website at: www.marketgps.janus.com
The following are highlights from Janus Market GPSTM 2017:
CHINA: Growing Pains
Since the 2008 global financial crisis, China’s commitment to deliver both monetary and fiscal stimulus in the domestic economy has been the growth engine of the global economy. However, the country amassed a significant amount of debt in the process. Without a pickup in growth elsewhere around the globe, we are concerned that the sustainability of this debt-fueled model will erode and present challenges going forward.
China’s growth is already slowing as the country pivots from a manufacturing-based economy to one driven by consumption. While we believe the transition to consumption remains on track, albeit relatively early in the process, we expect that the search for levers to boost growth will mean continued volatility in 2017. Yet, our recent visits to China convince us that growth is unlikely to collapse overnight, and that the world’s second-largest economy presents some attractive investment opportunities.
“There is a fundamental disconnect between the central government’s GDP ambition and its leverage rhetoric. Until the economy transitions sufficiently, China cannot slow leverage and achieve the current GDP target. Those two objectives cannot coexist.” – Barrington Pitt Miller, Equity Research Analyst
“China does not have to follow the path of the west. Coming along later, they are able to use the new economy to transition faster and bypass the costly steps that had to be taken in the West.” – Garth Yettick, CFA, Equity Research Analyst
“In developed markets, companies have to create demand. In emerging markets, companies have to create enough supply to meet the demand.” – George Maris, CFA, Equity Portfolio Manager
For more of Janus’ views on China visit: http://marketgps.janus.com/our-insights/china/
Inflation: It’s Back?
The U.S. and much of the developed world have witnessed a sustained period of stubbornly low price pressures. The Janus Asset Allocation and Fundamental Fixed Income teams believe this pastoral period of price pressures is likely to change. We are already seeing early signs of inflation, and we expect continued upward pressure on prices. Janus’ investment professionals are monitoring inflationary signals and actively adjusting our portfolios to account for these shifting expectations.
“This is not just a temporary commodity shock. Asset classes across the market are signaling that inflation is here and on the rise.” – Myron Scholes, Ph.D., Chief Investment Strategist
“We see inflationary forces despite a stronger U.S. Dollar. Inflation will be ignited by domestic spending. We expect the consumer will start to spend and a little pickup in the velocity of money will put the tremendous supply of money to use.” – Ash Alankar, Ph.D., Portfolio Manager, Global Head of Asset Allocation and Risk Management
“The U.S. inflation picture seems clear, as does that of the UK. Europe, however, is more challenging. Any inflation boost can easily be offset by inflation headwinds.” – Ryan Myerberg, Fundamental Fixed Income Portfolio Manager
For more of Janus’ views on inflation visit: http://marketgps.janus.com/our-insights/inflation/
Low Growth: An End in Sight?
Subpar economic growth has humbled investors for the past several years. While the recovery has been shallow, it has been long. Investors are now searching for clues on whether growth continues or stalls. Addressing this question, the Janus Asset Allocation Team uses its proprietary options-based model: A powerful tool that aggregates the convictions of a broad array of investors to help determine the greatest causes of concern and opportunities for investment. As discussed in our article on inflation, the model indicates that inflation is at the forefront of our concerns. Ashwin Alankar, Ph.D., Global Head of Asset Allocation and Risk Management, states, “The options market is telling us that the risk to interest rates and bonds is elevated as inflationary pressures rise.”
“At the same time,” Dr. Alankar continues, “Our model indicates meaningful upside potential for equities.” This more sanguine view toward stocks accelerated after the U.S. presidential election, as the model’s distributions of possible outcomes shifted considerably, inferring that economic growth should not only remain positive but also may break out of its subdued post-crisis range. In fact, Dr. Alankar believes that “The heightened focus on a left tail (downside) risk event in 2017 may very well result in missing a right tail event.”
“Companies that have growth look more attractive at this stage. They are reinvesting in their businesses, and although they may not pay as high a dividend, over the long term I believe you’ll get more cash out of them. Furthermore, true growth companies are not that much more expensive.” – Carmel Wellso, Director of Research, Portfolio Manager
“We see lower growth not only creating opportunity for growth stocks, but also value. The dispersion of performance among value stocks enables disciplined investors to purchase quality companies when they go on sale.” – Tom Reynolds, Portfolio Manager, Perkins Investment Management
“We view 2017 as a step along the road to normalization. The Fed wants to err on the side of more inflation and will not be so aggressive as to send us into recession. Assets that benefit from inflation will be better investments at this juncture.” – Myron Scholes, Ph.D., Chief Investment Strategist
To hear more of Janus’ views on low growth visit: https://marketgps.janus.com/our-insights/low-growth/
Energy: A Balancing Act
Since cratering at the start of 2016, crude oil prices rebounded during the first half of the year and have since been range-bound between $40 and $60 dollars a barrel. We believe prices could potentially go even higher in 2017 should OPEC and other large oil-producing countries follow through on promises to curtail production during the year. As such, Equity Research Analyst Noah Barrett, CFA, notes that the mood of the industry is now more positive. We appreciate that the surviving companies have withstood a challenging environment and now have a credible plan for coping with low prices. We also are closely monitoring catalysts that we feel will drive prices higher in coming years, especially within the supply/ demand dynamic, with an eye on those producers we believe will benefit most when demand for oil finally exceeds supply.
“The market has continued to reward companies that grow production as opposed to those that focus more on capital discipline. We haven’t cleaned out a lot of bad actors in the industry.” - Justin Tugman, CFA, Portfolio Manager, Perkins Investment Management
“Many big deepwater projects haven’t been sanctioned, increasing the probability of a meaningful supply gap by the end of the decade.” – Noah Barrett, CFA, Equity Research Analyst
To hear more of Janus’ views on energy visit: https://marketgps.janus.com/our-insights/energy/
THE INNOVATORS:
We believe investors will soon rediscover that growth matters, especially should broad economic expansion remain elusive. Nowhere do we see greater prospects for growth than in innovative companies. “Innovation has never been faster, nor has the pace of disruption been more rapid,” says Brinton Johns, Portfolio Manager. “Every company is a technology company, whether it realizes it or not.” Innovation is not limited to technology companies. Janus’ portfolio managers and research analysts see innovation as a key differentiator across multiple sectors. So while we have long favored leading tech, biotech and medical device firms, we also see examples of industrial and consumer companies adopting game-changing technologies and processes.
“I think the industrial Internet is still in its early days, but I am confident in the prospects for self-driving autos. It is just a matter of when.” – David Chung, CFA, Equity Research Analyst
“Rapidly evolving concepts, including machine vision and superior language capabilities, will speed the development of artificial intelligence. Also in the mix is so-called augmented reality, which will enable programmers to place digitally generated objects into the real world.” – Denny Fish, Equity Portfolio Manager
“The next wave of innovation will come from combination therapies, which often involve recently approved biomedicines. Already the combination of Bristol-Myers Squibb’s Opdivo and Yervoy has led to a meaningful improvement in survival rates for patients with metastatic melanoma, an advanced form of skin cancer. Over the next two years, we expect the FDA to approve combination therapies for other illnesses, including lung cancer.” – Andy Acker, CFA, Equity Portfolio Manager
To hear more of Janus’ views on innovator industries visit: https://marketgps.janus.com/our-insights/innovation/
About Janus Capital Group, Inc.
Janus Capital Group Inc. (NYSE:JNS) is a global investment firm dedicated to delivering better outcomes for clients through a broad range of investment solutions, including fixed income, equity, alternative and multi-asset class strategies. It does so through a number of distinct asset management platforms, including investment teams within Janus Capital Management LLC (Janus), as well as INTECH Investment Management LLC (INTECH), Perkins Investment Management LLC (Perkins) and Kapstream Capital Pty Limited (Kapstream), in addition to a suite of exchange-traded products. Each team brings distinct asset class expertise, perspective, style-specific experience and a disciplined approach to risk. Investment strategies are offered through open-end funds domiciled in both the U.S. and offshore, as well as through separately managed accounts, collective investment trusts and exchange-traded products. Based in Denver, JCG has offices located in 12 countries throughout North America, Europe, Asia and Australia. The firm had complex-wide assets under management and Exchange Traded Note assets totaling $198.9 billion as of September 30, 2016.
Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results.
The views expressed are those of the portfolio manager(s) and do not necessarily reflect the views of others in Janus’ organization. They are subject to change, and no forecasts can be guaranteed. The comments may not be relied upon as recommendations, investment advice or an indication of trading intent. There is no assurance that the investment process will consistently lead to successful investing. In preparing this document, Janus has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources.
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