- Global Investment Views - December 2018
Global Investment Views - December 2018
Wednesday 28 November 2018
Research / Market
Strategies for tough markets
This year has proven to be challenging for portfolio construction, as well as regarding returns. To put this into perspective, for 2009-17, our analysis shows that each year, on average, 76%of major asset classes (including different regional government bonds, equity, inflation-linked, currency and commodities) recorded positive performances. In 2018, the story has changed: we are heading towards an unprecedented year in which less than 20%of asset classes have been in positive territory*. Markets have started to price in a slowdown in global growth and tighter liquidity conditions, in a more complex than expected political environment (trade tariffs and populism). Vulnerabilities in the more stretched areas of the market (growth stocks in equities and credit markets) and idiosyncratic stories (Argentina, Turkey, Italy) are the main consequences of this new narrative.
US-China trade: continuing the talks while making the war
In our opinion, we should dismiss the idea that talks could breakdown, albeit uncertainties remain. On one side, in order to reach an agreement China wants the U.S. to remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand, and ensure that the text of the deal is “balanced” to ensure the “dignity” of both nations.
Economic crisis and political risk batter Argentina. Way out or opportunity?
Argentina’s economic situation: The economy is facing severe stagflation. Monetary and fiscal policy are extremely tight, consumer and investor confidence is low, and inflation is proving very sticky amidst wage indexation.
Asset Class Return Forecasts - Q2 - 2019
Our medium-term baseline scenario is that of a late business cycle slowdown followed by a probable mild economic recession in the next three to five years.