The Long View – 2018 Was A Bumpy Year And Now It’s Time To Get Active in 2019
After the relative calm of 2017, this year has been a rollercoaster ride for investors, especially for those of the cryptocurrency persuasion.
This current boom cycle has been unusually long but we seem to be entering another turbulent period for equities and fixed income.
We don’t think we’re about to be submerged by a storm in the markets just yet but there are dark clouds on the horizon.
US recession is not expected just yet
If 2018 was a year in which you sat tight and held on for dear life, 2019 will be a year in which wise investors will be more active.
The US economy is likely to decelerate as the effects of tax cuts fade, but a US recession is not expected just yet.
However, concerns about Brexit and European politics may fuel market uncertainty in Europe, while China will be hamstrung by trade tensions, its intensifying battle with the US (https://edition.cnn.com/2018/12/08/tech/huawei-cfo-tech-cold-war/index.html) over tech supremacy and its struggle to diversify its own economy.
Higher US interest rates and a foreshortening of quantitative easing from the US Federal Reserve and European Central Bank will apply a tourniquet to liquidity and create higher market volatility for investors in 2019.
Successfully navigating the markets will take greater skill
Savvy investors will see this as an opportunity to get busy with their investments.
Successfully navigating the markets will take greater skill, so investors should consider being active, rather than passively accepting market returns.
The global economy, which has been chugging along fairly steadily, is likely to experience some minor engine problems.
The main issues that will affect performance are the trade tensions between the US and China, and the UK and the EU, and political uncertainty, especially in Europe.
The value of being a contrarian investor will more apparent
Meanwhile persistent high oil prices and tight labour markets in the US, Europe and Japan could spark spiralling rates and soaring inflation.
Therefore, investors, as we suggested in the last instalment of The Long View (https://alsanagroup.com/the-long-view-dont-panic-yet-global-growth-is-still-strong/), need to be alert.
Keeping your head down and following the market as returns have steadily risen may have been an appealingly low-risk, high-reward approach but adhering to such a strategy in 2019 will probably wipe out value rather than increase it.
Prudent and well-informed investment and active portfolio management will be imperative in 2019.
And the value of thinking for yourself and being a contrarian investor (https://alsanagroup.com/why-you-should-be-a-contrarian-investor/) will become ever more apparent.
Paul Connolly
Paul Connolly has been a journalist for more than 20 years, as a reporter and editor for Argus Media, Reuters, The Times, Associated Newspapers and The Guardian. He has covered Islamic Finance for Reuters in the 1990s. Paul has since helped launch three newspapers, as well as reported from Tokyo, Los Angeles and Stockholm.
