Erste Asset Management

2017: a positive year on the global capital markets

2017: a positive year on the global capital markets
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Capital markets recorded a positive year of 2017. The performance of the various asset classes was of the textbook variety: the higher the risk, the higher the return. At slightly more than 1%, even low-yield asset classes such as euro government bonds or US Treasuries (in USD) posted positive rates of return1). This came as a surprise seeing that many experts had expected higher yields for government bonds, which would have come with negative effects on prices.

Corporate bonds with good to very good ratings and high-yield bonds recorded even higher rates of return. Equity markets were particularly strong, and nowhere more so than in Asian emerging markets. The only fly in the ointment for euro investors was the weak US dollar. Over the year, it lost about 12% vis-à-vis the euro, which was eating into the return of equities for euro investors.

Cryptocurrencies highly popular

2017 was surely also the year of bitcoin, the digital currency. Even if central banks and experts keep issuing warnings and risks such as hacks are looming on the horizon, bitcoin and other cryptocurrencies were in keen demand. However, too many questions remain unanswered to the mind of traditional asset managers. The biggest problem is that of valuation (or the currencies’ defiance of valuation). Thus, cryptocurrencies are too speculative for many institutional investors and are therefore not investable.

Robust global economic growth

The good economic performance in Europe and the USA is broadly based and has also captured the weaker, peripheral countries. The US economy has been going through the longest expansionary phase in history. In the emerging economies, the troubled countries of recent years such as Brazil and Russia seem to have overcome their recessions as well and are picking up speed.

Inflation moderate, globally speaking

Central banks were monitoring inflation closely. In 2017, the rate of inflation remained below expectations both in the USA and in Europe. Many economists are surprised that the low unemployment rate and the relatively good capacity utilisation have not caused inflation to rise significantly. In the USA for example, the unemployment rate is 4.1% and thus lower than in decades. The situation in the OECD region is similar.

Central banks are adjusting their interest rate policies

The US central bank has kept its policy of a moderate yet continuous increase of interest rates. It has also started in 2017 to let the government bonds purchased within the framework of the government bond purchase programme expire. The European Central Bank is lagging behind its US peer, sticking to its zero interest-rate policy in the past year.

Austria growing amid higher inflation

The Austrian Institute of Economic Research has revised economic growth upwards to 3.0%. Exports have increased significantly, supporting momentum. After years of weak development, investments are also clearly on the rise. Inflation is the only problematic issue in Austria, having come in at 2.4% in November 2017, i.e. substantially above the EU average of 1.8%. Housing, water, and energy are the price drivers. It will be interesting to see what measures the new government will take.

High political risks

The past year created a large degree of political uncertainty. The missile tests by North Korea, which caused sabre-rattling between the USA and North Korea, was particularly disruptive. But the conflicts between Ukraine and Russia and the controversial constitution referendum in Turkey created uncertainty as well. Also, the risk of terrorism increased significantly in 2017. Given this multitude of increased risks, the stock exchanges experienced surprisingly low levels of volatility overall.

Optimistic for 2018

Most experts are optimistic about 2018 and continue to see good opportunities for investors. However, risks such as an unexpected rise in inflation or possible escalation of a political nature should not be forgotten. Overall, volatility could increase relative to 2017. This suggests actively managed investment solutions, since they can react flexibly to developments on the capital markets.


1) Based on indices, prior to fees or costs.


We wish you all the best for 2018 as well as much success with your investment!


Legal note:

Prognoses are no reliable indicator for future performance.


Legal disclaimer

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.

The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website A summary of the investor rights is available in German and English on the website and can also be obtained from the Management Company.

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N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated. Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance.

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

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It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

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