The Investment outlook for 2019
- Significant US economic outperformance is unlikely to persist through 2019 as the sugar rush of the fiscal stimulus wanes. Growth in the major developed economies looks set to reconverge over the course of 2019 to a more lacklustre pace by recent standards, thanks in large part to Washington’s more hostile approach to trade. Companies globally are deferring investment and becoming more hesitant about hiring.
- Corporate earnings growth should also converge towards a slower, yet still positive rate of growth. Equity investors may wish to seek more regionally diversified portfolios and to reduce risk by focusing on quality, larger cap stocks in historically defensive sectors.
- The US Federal Reserve (Fed) may become more data dependent and rates are unlikely to rise much beyond the middle of the year. More sluggish growth may hinder the European Central Bank’s (ECB’s) attempts to normalise policy. Global monetary conditions will remain relatively loose, providing some solace for investors who had been concerned about the Fed hitting the brake.
- UK investors face the greatest conundrum. A resolution to the current Brexit impasse will be good for the economy, but is likely to challenge Gilts and internationally focused UK stocks in 2019.
- Navigating a market cycle is a bit like flying a plane. The dangerous bit – the part you really need to get right – is the take-off and landing. Investors need to have a closer eye on the controls and not be distracted by the usual turbulence as we pass down through the clouds.
|Karen Ward, Chief Market Strategist for EMEA|
Key themes for 2019