Macro outlook: Increasing growth, decreasing risks through 2013
We expect global growth to accelerate from 3.0% in 2012 to 3.3% in 2013.
The outlook is also likely to improve on three other dimensions: (1) the
time profile of growth shows an acceleration through the year; 2) the
European risks are smaller than last year following the ECB’s OMT
program; and 3) the oil supply constraint on global growth is loosening. In
our view, risks are concentrated early in the year, with the fiscal cliff, the
political transition in China, and uncertainty about Spain’s path to the OMT
program being high on our list. If these risks materialize, we expect them to
prove short-lived and, if they don’t, returns could be frontloaded.
Our views across asset classes

Commodities: We forecast a cyclically tight, but structurally stable oil
market, where roll yields should generate a larger part of returns. In this
environment, we believe commodities will generate good returns and
remain a hedge against supply-side disruptions. We remain overweight.

Equities: We upgrade to overweight over 3 months and remain so over 12
months. We expect returns to be supported by a combination of a rebound
in global growth, accelerating earnings growth and high risk premia.

Corporate credit: We expect tight IG spreads to compress further as still
sluggish growth and QE feed the search for yield, while tail risks decline,
against a backdrop of strong micro fundamentals, especially in the US.

Government bonds: Bond yields remain very low both on an absolute
basis and when benchmarked against macro fundamentals. We expect a
small increase over 3 months and a more substantial rise over 12 months.