Why 2019 might be a better year for investors

2018 has been a disappointing year for most investors. Almost all markets, both stocks and bonds, have fallen in value this year, under pressure from rising interest rates, political developments such as Brexit, and the trade dispute between the US and China. With hindsight, markets were priced for perfection at the start of the year and were vulnerable to bad news - and there has been plenty of that.

It is easy to be influenced by the pessimism now affecting markets. We accept that there is likely to be more bad news in 2019 - and I would pick out the trade dispute between the US and China as showing no sign of resolution and with the potential to damage economic growth around the world. But there are signs that market returns may be more positive in 2019.

Greater realism has arrived with falls in stock markets, particularly since September. Markets are pricing in at least some of the risks we have identified.

Schroders’ economists expect a gradual slowdown in growth in the US in 2019 and 2020. The emphasis is on the word gradual: we do not see a recession as likely in 2019 (although not inconceivable in 2020) as many of the forces that led to a strong year in the US in 2018 are still in play. The slowdown, however, means that an end to the cycle of rising interest rates is in sight. If we are right that interest rates rise no further than 3%, that is a modest peak compared to past economic cycles.

Our equity fund managers all point to slightly higher inflation next year as helpful to those companies that have strong market positions and the ability to raise prices. They also see more attractive valuations for many companies. Even in Europe and the UK, where growth has been disappointing, the income return from dividends alone looks more attractive compared to cash or bonds than for some time. Equities do, of course, carry greater risk along with potential for higher returns though.

Weaker growth in the US is also likely to lead to the US dollar losing ground against other currencies. This is good news for emerging stock and bond markets as a strong dollar sucks money away from these markets. Emerging markets, including China, have suffered particularly badly in 2018 and we would not be surprised to see them recover in 2019. Our multi-asset team describes their valuation as “provocatively low”.

Our bond managers are not so comfortable about the outlook, with the central banks, who have been huge buyers of government and other bonds, steadily departing the field.  Corporate bonds, however, have become cheaper in recent months and, if we are right about a limited slowdown in the US next year, will be supported by strong fundamentals.

2018 was the year in which the long term sustainability of business models started to influence how the market prices companies. We have seen criticism of some practices of large technology companies leading to falls in their stock prices, and increasing physical damage caused by climate change; inequality between generations has led to political turmoil in several European countries. Across our investment decision-making an eye on sustainability is becoming more and more critical.

We recently published a 10-year outlook for markets, Inescapable investment truths for the decade ahead. This highlighted the modest return prospects from public markets, given lower rates of economic growth than in the past and the low level of bond yields. 2019 will fit that pattern, with positive returns likely, but investors having to work hard - both through asset allocation and security selection - to augment low headline market returns.

I also continue to believe that private assets such as private equity and real estate will, as part of a diversified portfolio, help investors achieve their goals.

On this basis, 2019 should be a better year than 2018.


A selection of our Outlook 2019 series of articles is available below:

Outlook 2019: Global economy

Outlook 2019: Global bonds

Outlook 2019: Global equities

Outlook 2019: European equities

Outlook 2019: UK equities

Outlook 2019: Sustainability

Outlook 2019: Income

Outlook 2019: Multi-asset

Outlook 2019: US equities

Dit document is uitsluitend bedoeld ter informatie. Het materiaal is niet bedoeld als aanbod of uitnodiging om een financieel instrument of effect te kopen of te verkopen of een bepaalde beleggingsstrategie te volgen. De verstrekte informatie vormt geen beleggingsadvies, beleggingsaanbeveling of beleggingsonderzoek en is niet afgestemd op de specifieke omstandigheden van enige ontvanger. Het materiaal is niet bedoeld als financieel, juridisch of fiscaal advies en mag niet worden gebruikt als basis hiervoor. De vermelde informatie wordt geacht betrouwbaar te zijn, maar de juistheid of volledigheid wordt door Schroders niet gegarandeerd. Schroders is niet aansprakelijk voor onjuistheden in feiten of meningen. De opvattingen en informatie in dit document mogen niet worden gebruikt als basis voor individuele beleggingsbeslissingen en/of strategische beslissingen.


In het verleden behaalde resultaten zijn geen betrouwbare leidraad voor de toekomstige resultaten. De koersen van aandelen en de daaruit gegenereerde inkomsten kunnen zowel dalen als stijgen, en het is mogelijk dat beleggers het oorspronkelijk geïnvesteerde bedrag niet terugkrijgen.


Dit document geeft de meningen en opvattingen van Schroders weer. Deze kunnen veranderen. 


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De prognoses in dit document zijn het resultaat van statistische modellering op basis van een aantal aannames. Prognoses zijn onderhevig aan een hoge mate van onzekerheid ten aanzien van toekomstige economische omstandigheden en marktfactoren die de feitelijke toekomstige resultaten kunnen beïnvloeden. De prognoses worden verstrekt ter informatie volgens de stand van zaken op dit moment. De gehanteerde aannames kunnen aanzienlijk veranderen als gevolg van veranderingen in de onderliggende aannames, die onder meer het gevolg kunnen zijn van veranderingen in de economische omstandigheden en marktfactoren. Schroders is niet verplicht u op de hoogte te stellen van aanpassingen of veranderingen in deze informatie wanneer aannames, economische omstandigheden, marktfactoren, modellen of andere zaken veranderen.