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

Be selective

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.

 

Download full 2019 Outlook

Some or all the securities identified and described may represent securities purchased in client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. The securities or companies identified do not represent all of the securities purchased, sold, or recommended for advisory clients. Actual holdings will vary for each client. FANG is an acronym widely used on Wall Street and among many investors; it stands for four high performing large cap technology companies – Facebook, Amazon, Netflix and Google (now Alphabet) – that are also household names. BAT is a similarly widely used acronym for three large cap tech companies in China: Baidu, Alibaba and Tencent.

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