Returns are likely to be muted in 2016 for both global equities and global bonds. We continue to prefer equities for investors with a medium- to long-term investment horizon. European equities, in particular, are likely to benefit from favourable cyclical and structural developments. Dividends remain an important source of equity returns in this low growth environment. Global growth is likely to be around potential, while monetary policy will remain highly expansionary globally for years. Active investing across and within asset classes, rather than just a buy-and-hold strategy, will be key to superior performance in 2016.