2019 Long Term Capital Market Assumptions (USD)

Invesco's Long Term Capital Market Assumptions (LTCMAs) for 2019 details how our Global Solutions team forecasts asset class behavior for the year ahead.

Dec 21, 2018 | Invesco Global Solutions team

Executive summary

  • 2019 promises to be another year of opportunity and challenges. We expect global growth to remain resilient but to slow across most major developed market (DM) and emerging market (EM) economies. However, economic policy is now more explicitly politicized than at any time in the post-Soviet/China-WTO era of globalization, which threatens the structure of a global economy open for trade, corporate and financial investment. The uncertainties of Brexit, Eurozone (EZ) political risk and US-China tension are already affecting financial markets and confidence.
  • We expect cyclical deceleration to continue yet to leave growth near or above trend in key economies – especially in the US (2.5% real GDP growth) and EZ (1.7%), and still strong if slowing growth in major EMs, with China (6.0%) and India (7.4%). But the balance of risks is tilted to the downside, due to cyclical divergence that might cause another bout of dollar strength and tighter global financial conditions; and US-China, Brexit and EZ tensions threaten to undermine business and household confidence and deter, divert or delay investment across borders, and household consumption, especially of big-ticket or discretionary items like homes, cars and white goods.
  • The uncertain macro environment of growth/policy divergence and structural risks points to continued high market volatility and considerable differentiation in performance across geographies and asset classes. This variability is likely to include both dollar strength and weakness in 2019 as Fed policy likely continues to tighten then plateau, with risks of delayed policy changes by the ECB, BoE and BoJ due to intra-EZ, Brexit or trade friction.
  • As a result of our CMA estimates, we believe USD investors are likely to experience higher risk-adjusted returns in equities than most fixed-income asset classes. Global, EZ, UK and US equities are expected to deliver comparable USD risk-adjusted returns. In alternatives, we expect energy, base metals and infrastructure to outperform soft commodities, precious metals and hedge funds.

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