Investment Outlook (Q4/2018)

The Investment Outlook for the fourth quarter of 2018 has been published.
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“Your net worth to the world is usually determined by what remains after your bad habits are subtracted from your good ones.”

Benjamin Franklin

Macro Environment

  • Inflation pressure in developed markets is picking up slightly
  • European recovery looses momentum
  • US sentiment & confidence remain intact
  • Emerging markets growth remains robust while confidence numbers are falling

Outlook and Markets

  • Valuations remain stretched
  • Trade frictions between the US and China, increase and threaten to escalate further
  • Fed still on track to tighten further but might be forced to change stance due to trade frictions

Main Investment Calls

  • Remain cautious and keep a neutral position of the return and income portion in the model portfolio
  • Maintain an overweight in Cash
  • Equities over Sovereign Bonds
  • Emerging over Developed Equities
  • EMD and Investment Grade Credit over Sovereign Bonds
  • TIPS as an (unexpected) inflation hedge

Main Risks

  • Full scale trade war between the US and China escalating also on a political level
  • Higher than expected inflation in the US, coupled with substantially increased spending leads to more than the expected rate hikes by the Fed and choke off economic momentum, leading to a possible recession
  • Budget dispute between Italy and the EU escalates further and morphs into a Euro Crisis 2.0
  • Risks of policy missteps as China continues the attempt to rebalance its economy to a more domestically supported one and impose too strict regulatory frameworks on banks

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