2019 Outlook: Global Solutions

Heading into an uncertain 2019, diversification must be top of mind

Dec 17, 2018 | Duy Nguyen

Key takeaways

  • The road ahead is expected to be challenging due to a variety of factors: rising global interest rates; increased volatility; diverging global monetary policies; and heightened geopolitical tensions around trade and tariffs.
  • Our forecasts for returns are tepid across the major asset classes.
  • There remain pockets of opportunities within asset classes.

Heading into 2019, the market’s resiliency is likely to be tested by evolving geopolitical tensions and questions regarding the ability of a late stage economy’s ability to grow. Volatility is expected to remain elevated as the markets seek additional support for increasing asset prices beyond continued earnings growth and the perceived positive impact of tax cuts. However, the road ahead will likely be more challenging to navigate. While the economy, as measured by Gross Domestic Product, continues to expand, and US equities are experiencing their second largest expansion in recent history, there are numerous challenges for investors to navigate going forward, including:

  • Rising global interest rates
  • Increased volatility
  • Higher correlations among traditional asset classes
  • Diverging global monetary policies
  • Heightened geopolitical tensions around trade and tariffs

In short, the landscape for investors is increasingly complex, and our estimates for returns across asset classes remain tepid. In our 2018 Outlook last year, we talked about blind spots, particularly with respect to the benefits of diversification across and within asset classes. This year, we are focusing on how to avoid those blind spots in the uncharted markets ahead. Fortunately, the investment tool kit available to investors has expanded over recent years, particularly for those seeking diversification; ongoing areas of development in the financial marketplace include factor based strategies, private market investments and multi-asset outcome-oriented solutions.

 

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