European Banks
While the banking sector on the other side of the pond has soared over the past few years, value investors have kept a keen eye on the continental European banking sector as their shares have suffered.
Compass - 2019 market outlook
05 February 2019
15 minute read
The doomsayer trade, parched by a crisis-free 2017, is clearly feeling replenished by a year that managed to provide both negative headlines and a few more fundamental factors to worry about.
While the US economy has surged on the back of a dose of fiscal sugar, growth rates in large parts of the rest of the world economy swooned for a variety of reasons.
This issue of Compass has put 2018’s financial markets under the microscope and has analysed what 2019 may have in store.
When looking to 2019, slower economic and corporate earnings growth seem to be ahead, but recession doesn’t seem to be on the horizon yet.
If recession was to hit tomorrow, our portfolios will not face it as reckless bets on an overly optimistic worldview.
However, some of these fears look overblown to us. The world economy’s underlying health, if anything, is being underestimated by investors.
Finding the appropriate perspective for the many threats that are (always) ranged against the global economy remains the hardest challenge.
It’s always worth remembering that the media’s agenda may not be compatible with your own as an investor and may not always align with our expectations regarding global growth
We exit 2018 well positioned for challenges in many areas of the world’s capital markets but if such gloom does not fully materialise as we still expect, stocks should continue to outperform bonds. We explore this in five themes detailed in this publication, including emerging market equities, developed market equities, Brexit, inflation and the US dollar.
We hope you enjoy this issue [PDF, 2MB].
Blue Chips
As central banks have fallen short of their inflation targets for a number of years, inflation expectations have gradually been drifting lower. However, the unemployment rate in the US remains at historically low levels with few signs of easing.
The 'Fourth Industrial Revolution'
As described by the famous engineer and economist, Klaus Schwab, the ‘Fourth Industrial Revolution’ is characterised by a fusion of technologies that are “blurring the lines between physical, digital and biological spheres”.
Japanese Equities
The history of corporate Japan, both pre and post-WW2 is more influential in this story than many realise.
US High Yield
After a multi-decade bull run in interest rates and extraordinary measures taken by central banks to combat the most serious recession in living memory leading to historically low yields.
Emerging Asia
After reaping the benefits of synchronised global growth in 2017, EM equities have stumbled since amidst slower than expected growth, higher US rates and increased risks surrounding trade protectionism.