The past 12 months have been something of a rollercoaster for markets, which have had to deal with increased uncertainty driven by unexpected outcomes in the UK’s referendum on EU membership and the US presidential election. 
Despite the rise of populist politics and the challenges to the post-war, free market order, equities have proved resilient though recent months have seen a rotation out of previously strong quality-growth stocks towards value investing.
Elsewhere, bond markets begun to move towards a reflationary environment and the potential for further interest rate rises in 2017.
Below we look at the forecasts from some of the biggest names in the fund management space and pick out some of the trends they expect to see in 2017.
Buxton: Banks, commodity producers and cyclical stocks “clear winners” in 2017
Richard Buxton, head of UK equities and chief executive of Old Mutual Global Investors, says the election of Donald Trump to the US presidency and a rise in political populism is likely to lead to mean a reduced role of central bankers.
He says “the role of central bankers as key decision acting completely independently of ruling and democratically-elected governments, is now open to question”.
Buxton (pictured) says that the impact on stock markets “will be manifold”, adding: “The rise in inflationary expectations, which has resulted at long last in an upward sloping, or positive yield curve, is good news in so many ways.
“For the financial community it restores banking profitability, the life-blood of economic activity. For the business community it means entrepreneurs can start to invest with greater confidence, knowing what their genuine cost of capital is likely to be. For the saving community, at long last, it hails a better return on hard-earned savings.”
He added: “And as for those companies with burgeoning pension fund deficits, finally their growing liabilities, which have ballooned on paper, courtesy of negative interest rates, will be reduced.”
Buxton backs banks, producers of commodities and stocks which have a degree of cyclicality attached to them as the “clear winners” in 2017.
However, he warns that stock markets in the UK and US have already marked prices higher.
Leaviss: A move to ‘normal’ yield levels?
Jim Leaviss, manager of the M&G Global Macro Bond and the M&G European Inflation Linked Corporate Bond funds, says the election of Trump has already begun to make waves in the bond markets but the longer-term impact remains to be seen.
“A sharp sell-off in government bonds was among the key reactions in financial markets to the US election result, although it is as yet unclear whether this is just another blip, or the start of a more sustained move back towards ‘normal’ yield levels after years at close to historic lows,” he said. 
“Importantly, with the Republican Party in control of both the Senate and the House of Representatives, president-elect Trump should have the political power to advance his headline economic policies of significant infrastructure spending and big cuts in corporation tax.
“We should expect follow-through on trade protection measures as well, starting with his stated intention to withdraw the US from the Trans-Pacific Partnership on his first day in office. The repatriation of some immigrant workers and Trump’s border wall is also likely to stay on the agenda.”
He added: “For bond investors, it’s a cocktail that adds up to increased government borrowing and firmer inflation prospects.”
The impact of a Trump presidency is likely to be felt by emerging market debt investors more keenly, particularly given the importance the president-elect placed on trade protectionism.
“Although US Treasury yields have so far risen sharply since the US election result, we expect yields to gradually edge higher in a more modest and gradual manner,” said Leaviss (pictured).
“For a number of emerging markets, this prospect is less challenging than it might have been in previous years, as they have improved current account deficits and adjusted to having lower overall levels of US dollar-denominated debt.”
Mobius: Emerging market growth likely to continue
Following a strong 2016 for emerging market equities, many investors will be considering whether the strategy can repeat performance again in 2017.
At Templeton Emerging Markets Group, chief investment officer Stephen Dover and executive chairman Mark Mobius remain bullish on growth prospects for developing economies.
“Following recent improvements, we expect macroeconomic advances to continue in 2017,” note Dover and Mobius. “This could bode well for top-line growth opportunities and the earnings outlook for emerging market equities.”
“We believe that, while GDP growth in a number of emerging-market countries has been gaining ground, it is likely that over the next few years we could see further relative advances in sizable economies like Russia and Brazil.”
“The economies of these two countries are still contracting, but they are on an improving trajectory and could significantly influence the growth rate of the whole group if they continue to progress.”
“Meanwhile, China’s growth, which has been a key concern for many observers, has shown signs of stability and remains at a strong level compared to most other large economies. In the third quarter of 2016, the country’s year-on-year growth in GDP came in at a rate of 6.7 per cent, which was in line with the pace reported in the previous two quarters.”
The pair added: “Emerging-market countries are still far behind their developed-market counterparts when it comes to overall GDP-per-capita, and so we continue to expect strong growth prospects over the long term.”
Mundy: Low bond yields are not good for valuations
Alastair Mundy, head of the value team at Investec Asset Management, says the outlook for value investing remains challenging in 2017 as valuations remain elevated. The fund manager says he remains unconvinced that low government bond yields support high equity valuations. 
“With valuations high and earnings growth vulnerable, we will tread carefully throughout 2017,” he said.
“Investors face a number of uncertainties: concerns over global political events, the consequences of the UK leaving the EU, a slowdown in Chinese economic growth and the increasing experimentation being undertaken by central banks globally.
“Equity markets could become more volatile as the year progresses. If they do, this should present interesting opportunities.”
Mundy (pictured) added: “Value has generally outperformed growth since February 2016; initially mining and energy stocks outperformed, and latterly the banks.
“This uplift has, perhaps, been obscured by the magnitude of underperformance of value stocks since the global financial crisis in 2008. Despite this more recent outperformance, the discrepancy in performance between value and growth stocks remains at extreme levels in both the UK and global equity markets.”
He added: “Historically, when such extremes have been reached, the subsequent outperformance of value has been both substantial and sharp.
“However, in absolute terms, cheap stocks are relatively hard to find in the UK, as valuations remain significantly above long-term averages. Despite this, we are finding attractive opportunities in the banking and food retailing sectors.”