Investors will be feeling more than a little gloomy about the 2019 investment outlook, but according to Nigel Green, founder of deVere Group, there is still a possibility to make decent returns in the New Year. He sees three key tailwinds which he thinks will help to drive positive investor outcomes.
2019 investment outlook – the good news
First, following stock market falls in recent months, valuations are attractive in many sectors and countries, relative to the returns on cash and likely corporate earnings growth. Emerging markets in particular are considered to be offering value.
Second, global growth expectations have been reduced in recent months, but with global GDP growth in 2019 likely to be 3% plus, deVere is expecting continued corporate profits growth in many of the major economies and in particular in the US.
“The Federal Reserve has signaled that next year’s planned interest rate hikes may be delayed if economic data weakens, which last week’s relatively modest payrolls data and November’s inflation data suggests is the case,” Green says. “Should the Fed push back raising rates, this will help support the US, and therefore global economy.”
Thirdly, deVere also thinks that the world’s financial system is in much better condition. Banks and other financial institutions have significantly enhanced their capital levels over the last decade, making them more capable of withstanding defaults on loans.
This all goes some way to supporting a positive 2019 investment outlook.
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2019 investment outlook – the warning signals
DeVere also sounded a cautionary note about some of the wild cards in the deck. For starters, there is the ongoing trade dispute between the world’s two largest economies, followed by higher US Treasury yields, which will raise the risk-free rate of capital. There is also higher inflation to consider and the threat posed by Brexit.
“History teaches us that stock markets go up over the long term, so I would urge investors to remain invested,” Green says. “No one wants to miss out on returns.”
DeVere recommends that investors remain diversified across all asset classes, sectors, regions and currencies. It is considered the best way to mitigate risk and take advantage of opportunities in the market.