Lucas Financial Consulting Ltd

There is a ring of familiarity to many of our 2015 forecasts. As with last year, we expect global growth to keep ticking along, led by the US. We are also broadly positive on global equity markets.The divergence between countries, sectors and stocks will remain in place. Central Banks around the world will continue to tread a different path, with the US and UK set to tighten, while the Bank of Japan and European Central Bank will remain expansionary.

In China, the assumption is that the economic deceleration will be modest as the country continues to rebalance. The oil situation looks here to stay (at least for now), while geopolitics will also play a part. Investors have continued to focus on the divergent policies of the world’s major central banks but it is essential to put these into economic context.

The US and UK economies have performed steadily and we expect this to continue into 2015. The timing of rate hikes in these two countries will not be coordinated but we expect them to be the first core central banks to move higher.

In contrast, we expect further monetary easing from both the Bank of Japan and the European Central Bank. Most major government bond markets look vulnerable at current valuations but it is unclear what will trigger a reassessment.

Corporate bonds continue to offer some value on a relative basis but volatility is likely to continue due to political and economic uncertainty.

We expect compelling positive total returns for UK real estate investors over a three-year period,with reasonable yield and strong capital appreciation. With improving economic drivers and a constrained pipeline of future new developments, real estate remains attractive.

Rising interest rates are an emerging risk, however, there is a reasonable buffer in pricing to compensate if investors price in any further acceleration of rate rises. We still believe that poorer quality secondary and tertiary assets are generally unattractive. However, there will be opportunities to reposition assets or generate reasonably good returns on a comparable basis from some poorer quality secondary assets.