Economic and Strategy Viewpoint

Economic and Strategy Viewpoint - January 2019

2018 review: A tough year for investors

  • We look back at a year full of challenges for investors as trade wars came into effect and Europe endured a mini Italian debt crisis, while parts of the emerging markets were hit by tighter dollar liquidity and political risk.
  • 2018 was a poor year for investors as both US equities and Treasuries underperformed cash – a very rare event. Away from the US, there were places to hide in other developed market government bonds, along with safe haven currencies like the Japanese yen and the Swiss franc. The Mexican peso was also an unlikely winner in 2018.

Three themes for 2019 and some black swans

  • Growth concerns and tightening liquidity weighed on markets in 2018 and look set to continue in 2019. As the European Central Bank ends QE, we estimate that global liquidity will contract further this year, keeping pressure on some of the riskier areas of finance.
  • Investors will look for governments to boost growth through fiscal policy and in emerging markets will seek relief from a stronger dollar as the Fed brings the tightening cycle to a close. We also note that following the de-rating at the end of 2018, equity markets are better positioned for disappointment than a year ago.
  • Black swans include another eurozone crisis, the UK remaining in the EU, military action and Trump not running for re-election.

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Economic and Strategy Viewpoint - January 2019 22 pages | 1 098 kb