That is the view of Stefan Van Geyt, Group Chief Investment Officer at KBL European Private Bankers (KBL epb), which today released its 2016 Midyear Investment Perspectives, covering the global economy, financial markets and key asset classes.

Despite the impact of the UK’s Brexit vote and other risk factors – such as the outcome of US elections, oil-price and inflation trends, and the potential ongoing devaluation of the Chinese yuan ­– Van Geyt expects global GDP to expand by roughly 3% in 2016.

Prolonged political uncertainty will weigh most heavily on the UK economy, which will experience a short-term negative GDP growth impact of between 1-2%, he said, adding that Brexit will also impact the eurozone, where, following a solid first half, 1.5% annual GDP growth appears realistic.

In the United States, Van Geyt said, “Private consumption is the predominant driver, reflecting the lowest level of unemployment since 2008 and the fewest jobless claims since 1970. Consequently, US wages are now edging up – which will continue to support positive consumer sentiment and higher private spending in the second half of this year.”

Wrapping up his macroeconomic outlook, he expects Japanese growth to remain sluggish, while emerging-market commodity exporters will experience a slight, price-driven recovery; a Chinese hard landing, though unlikely, cannot be ruled out.

Turning to the investment outlook, Van Geyt said: “Markets prefer good news to bad, as the immediate reaction to the Brexit vote showed, but there is nothing they hate more than uncertainty. In the second half of this year, the world will face a great deal of such ambivalence.”

Consequently, he argued that public-sector investment may stall, private-sector firms will continue to hoard cash, and consumers will remain focused on saving or paying down debt. All of this, he said, could negatively impact the global macroeconomic outlook (slightly), corporate profitability (somewhat) and investor sentiment (potentially significantly).

“In the current context,” he said, “we believe that it’s important to focus on portfolio diversification, likely including frequent short-term adjustments.”

While it’s difficult to find value in fixed income – with some 40% of government bonds now trading at negative yields – Van Geyt indicated a preference for bonds offering better potential returns but also more risk, including corporates, US high-yield and peripheral government bonds, emerging-market debt and, given the inflation outlook, US inflation-linked bonds.

While favoring absolute return equity strategies, where being short on overvalued equities and long on attractive ones could provide additional returns, KBL epb’s Group CIO expects global equity markets to continue fluctuating for the rest of the year, while regional divergences will likely remain significant.

Given falling 2016 earnings estimates and current risks, he said, “Analyst consensus estimates of double-digit earnings growth for both Europe and the US look overly optimistic, despite marginally greater economic support expected on both sides of the Atlantic.”

Concluding with alternatives, Van Geyt said: “We see promise in real estate – excluding in Europe, due to the Brexit impact. Globally, vacancy rates are low, the finalization of new construction is limited, and both rents and asset values are rising. Gold also holds appeal – not only as a safe haven but also as a hedge against currency devaluations and negative interest rate policies.”

Further analysis is available in KBL epb’s 2016 Midyear Investment Perspectives, which can be downloaded at: www.kbl.lu