Q1 2019

Most investors will be glad to see the back of 2018 when both US equity and government bond markets generated returns that were lower than cash. Such an outcome has only been registered in two previous calendar years since 1900 and highlights the challenge for investors in the current environment (see Review of 2018 on page 13).

At the start of 2018, expectations were high as a result of the synchronised recovery in global activity in 2017. However, global growth disappointed and remained a concern as trade tensions escalated. At the same time, a stronger US dollar and the tightening of global liquidity held back the performance of risk assets.

In terms of asset allocation, we have moved to a more neutral stance over the quarter by closing our overweight in equities and commodities in recognition of the less positive macro backdrop. On bonds, we remain underweight government bonds and credit given unattractive valuations.

Looking ahead into 2019, there are some key themes for markets. Global liquidity is likely to slow further with the continuation of the Federal Reserve’s (Fed) quantitative tightening (QT) and the European Central Bank (ECB) ending its asset purchase programme. While the tightening of global liquidity and trade wars will not help, a pause in tightening by the Fed could bring relief to dollar borrowers and emerging markets. Populist pressures could also see governments turn to fiscal policy to generate growth (see strategy note on page 24).

Meanwhile, this quarter, we also take a look at the investment implications of the US cycle particularly as we approach the slowdown phase, a more challenging and volatile phase of the cycle (see research note on page 31).

The full Global Market Perspective is available below.

Read the full report

Global Market Perspective - Q1 2019 39 pages | 1,345 kb


Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. The content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.