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Investment Outlook

Our CIOs Discuss Current Market Opportunities & Risks

After an extended period of relative calm, volatility came roaring back during the first quarter. Global equity markets experienced long overdue corrections amid worries about rising inflation, the growing U.S. federal deficit, and higher U.S. Treasury yields. Combined with trade war fears, these concerns are important reminders for investors to avoid becoming too complacent.

Additional highlights:

  • Global Growth Equity: Higher rates, inflation creating a stock picker’s market
  • Global Value Equity: Volatility providing buying opportunities in energy and health care
  • Global Fixed Income: Wide spreads between U.S. and Europe creating select opportunities

Key Takeaways

  • We can make a positive case for U.S. equities in the short run, but expected returns over the intermediate term are less attractive given where we are in the economic and market cycles.
  • The shift to digital platforms continues to create opportunities globally for growth and value managers alike, albeit in different sectors and industries.
  • Value investors are finding opportunities in the energy sector, where the market has been overly focused on commodity prices, and in health care where hot political rhetoric has created buying opportunities.
  • We see room for emerging markets stocks to continue to gain. We believe the catalysts of synchronized global growth and improving local markets are sustaining the rally and helping companies generate earnings growth.
  • In U.S. fixed income, we are still finding value among investment-grade corporate bonds, particularly those with BBB credit ratings, but we are avoiding the riskiest segments of the high yield sector.
  • We expect the wide spread differential between U.S. and European rates to narrow. Long position in U.S. Treasuries and short positions in European government bonds may be beneficial in this scenario.
  • In emerging markets, tight spread levels suggest reducing exposure to U.S. dollar-denominated debt in favor of local currency exposure.
  • We believe alternative sources of yield, such as bank loans, select asset-backed securities and collateralized loan obligations, offer opportunities in the current climate.

Investment Outlook Brochure

2018 CIO Roundtable

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The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Generally, as interest rates rise, bond prices fall. The opposite is true when interest rates decline.

International investing involves special risks, such as political instability and currency fluctuations.

Historically, small- and/or mid-cap stocks have been more volatile than the stock of larger, more-established companies. Smaller companies may have limited resources, product lines and markets, and their securities may trade less frequently and in more limited volumes than the securities of larger companies.

References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

American Century Investments uses a multifactor stock-ranking model incorporating a variety of stock attributes, which fall into four categories or factor families: valuation, growth, quality, and sentiment.

Diversification does not assure a profit nor does it protect against loss of principal.