Ten for 2019

(As at: 29 November 2018)

1. New rulebook for global economy

  • Economic growth continues, yet subdued
  • Populism increases political risk
  • Sino-american conflict threatens world (economic) order

2. Europe has to live with political risk premia

  • Germany: Politics only little future-oriented
  • Italy: Political, but no fiscal problems yet
  • UK: Economic damage increases with Brexit uncertainty

3. Economic growth flattens as divergence persists

  • Growth gap between US and Europe lasts in 2019
  • US: Second longest economic upswing since World War II won´t come to an end
  • Europe: Economic climate becomes increasingly challenging

4. Inflationary pressures mount - slowly but steadily

  • Moderate inflationary pressure both in the US and in Europe
  • US: Price increases slightly above the Feds` target
  • EMU: Inflation rates expected to rise during 2019

5. Central banks: Monetary flood abates

  • Moderate tightening to be anticipated
  • US: Three rate hikes in 2019 (plus one in December 2018)
  • Eurozone: ECB will adjust monetary policy in the second half of the year

6. Fixed income: Yields face moderate upward pressure

  • Bunds and (initially) US-Treasuries see rising yields
  • European periphery bonds burdened by political risk premiums
  • Credits: Higher interest rates and mounting risk lead to spread tightening

7. Emerging Markets: Headwinds recede in 2019

China fights for balance – with an uncertain ending

  • Strong dollar hampers emerging markets stocks
  • Valuation of emerging markets bonds become gradually more attractive

8. Stocks: Late-cycle bull market lacks momentum

  • Earnings 2019: Higher cost, but no margin widening
  • Mature cycle limits performance to amount of earnings increases
  • US stocks show an advantage over emerging markets

9. Commodities caught between economic cycle and geopolitics

  • Oil: Markets switch to supply surplus in 2019
  • Metals: Supply remains subdued – industrial metals favoured
  • Gold: Decoupling from real rates

10. Investing within a fragile environment – activity beats volatility

  • Upheavals in macro economics, monetary and geo politics will shape markets
  • Differentiated picture should lead to more volatile markets
  • Activity and selection will be key to succesful investing strategies