2019 outlook: active selection is essential
In the coming year, we expect to see lower correlations, higher volatility and lower returns, particularly for equities. Our 2019 outlook explores why active investing is likely to be essential.
To put our 2019 outlook into action, aim to be more active and selective. For example, make sure you don’t write off entire regions or markets based a single event such as Brexit. Rather, it’s important to understand which stocks/sectors will be favoured based on specific scenarios.
Five actions to consider
Don't write off entire regions or markets based on one event – Brexit, for example. It's important to understand which stocks/sectors will be favoured based on specific scenarios.
Guard against inflation
Globally, inflation pressures are rising as consumer prices increase; investors should consider equities, commodities and real estate as natural inflation hedges. Global equities and commodities still look well-positioned as a whole.
Keep searching for income
The hunt for income remains pressing in a world still experiencing low interest rates. Investment-grade and high-yield bonds in the US and Europe may be challenged in the coming year, though credit fundamentals are stable globally.
Look for contrarian ideas
Diversification as a strategy is not working as well, as QE has mispriced many asset classes; contrarian ideas and out-of-consensus themes may come into favour.
Search for alpha from disruption
Disruption of politics and technology is creating clear winners and losers globally; active research and analysis can improve the chances of finding alpha.
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