• Home
  • About
  • Newsletters
  • Conference
  • TMS Links
  • Calendar
  • Log In
  • Register

Room 151

  • 151 BRIEF

    What's New?

  • LGPS infrastructure partnership invests £1.8bn in renewables

    December 12, 2019

  • Brunel appoints global high alpha managers

    December 11, 2019

  • City of London completes £250m debt deal

    December 11, 2019

  • Mystery bidder appointed on £250m waste contract

    December 11, 2019

  • Investors withdraw from property fund

    December 11, 2019

  • Highland councillors back tourist tax

    December 11, 2019

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews
  • Jobs

Looking ahead: Investment market prospects for 2019

0
  • by James Bevan
  • in Blogs · James Bevan · LGPSi · Resources · Treasury
  • — 21 Jan, 2019
    Financial listings in newspaper

    Investors should steel themselves for a potentially bumpy ride in 2019, says James Bevan.

    2018 was a challenging year for the global economy with slowing growth, tightening financial conditions and political developments that offered only uncertainty.

    In the near term, the global economy looks likely to slow further.

    But recently, markets appear to be entertaining the idea that policy could turn things around, and in seeking to understand whether the rally is for real, we see three policy areas that could affect the global economy in 2019 – the US, China, and Europe.

    US growth has been reliable if not exciting in recent years, after the benefits of Mr Trump’s tax cuts and Jobs Act and the cross-party fiscal expansion.

    However, we can expect growth to slow in 2019 as the effects of the fiscal stimulus fade and the capital expenditure cycle loses momentum.

    That said, rising wage growth and lower oil prices should support consumer spending and prevent growth from slipping below trend and the Federal Reserve looks set to continue raising interest rates, but at a slower pace, in search of the so-called ‘neutral’ level.

    With China, the economy has been slowing and we can expect the slowdown to continue through the first half of the year, with weakness spreading to real estate and manufacturing investment.

    Policymakers are starting to respond with less conflicted stimulus measures than were offered last year, which should ultimately prove successful.

    The gap between policy easing and economic recovery may be risky for the yuan, but a lower currency would also help the economy.

    As for Europe, it looks set to be a “taker” of global growth, with weakness in the US and China weighing on activity.

    But, unlike China and the US, monetary policy options look limited, and with the Eurozone, the Italian budget stand-off and looming European elections mean it is unlikely that other institutions will take up the reins.

    This means we are unlikely to see counter-cyclical policies in 2019, with potential for more volatility.

    Against this backdrop, and with concerns about valuations, future growth and macro-political developments, risk asset markets suffered a pullback in the fourth quarter of 2018.

    But valuations are less rich, and whilst growth is slowing we see limited risk of an early global recession, along with some signs that the authorities are developing policies that will be positive for markets, including more accommodative commentary from the US Federal Reserve.

    As to what all this means for markets, there are some indicators that suggest that the downturn is now over, including technical signals based on moving averages, shifts in portfolio positioning, the current strength of this rally, shifting central bank rhetoric, and the non-consensus nature of this view which means that the view can become self-feeding. We would presently regard this as a low probability scenario.

    At the other end of the scale, it is possible that we are on the precipice of an ugly bear market.

    We would put a low to medium probability on this scenario, recognising that if central banks are too slow to stimulate (or are not aggressive enough) bubbles could burst.

    Cheap money has created bubbles, and its removal could be destructive – once bubbles have burst they are hard to control or offset and damage can be contagious.

    Our central scenario, is that we get a continuation of the current relief rally into late January/February, followed by a topping out or rolling over, and then weakness into March or April driven by falling liquidity, adverse fund flows and tight credit.

    That weakness may involve a retest of the S&P 500 lows or potentially plumbing new lows.

    The pattern of returns would be similar to what was experienced in 2015-16 but, consistent with our view that what the authorities do now is critical, we worry that money supply measures have become weak, with for example, global (GDP weighted) base money supply at its weakest since the global financial crisis.

    We see the way forward for investors seeking decent income flows and long-term growth and prepared to put up with a bouncy ride, as focusing on a diversified set of assets where pricing is conservative, and underlying returns relatively assured.

    If the global economy shoots up, this strategy would likely look very pedestrian, but in less clement market conditions it may shine.

    James Bevan is chief investment officer of CCLA, specialist fund manager for charities and the public sector. CCLA launched The Public Sector Deposit Fund in 2011 to meet the needs of local authorities and other public sector organisations. You can follow James on twitter @jamesbevan_ccla

    *CCLA is a supporter of Room151

    Share

    You may also like...

    • Lancs merger of s151 and CEO roles sparks accountability row 23 Aug, 2017
    • ‘Seamless transition’ for clients says new owner of Capita Asset Services 29 Jun, 2017
    • Brunel launches emerging markets sub-fund 14 Nov, 2019
    • Chris Buss: Loadsamoney, reserves and de-risking estate regeneration 21 May, 2015

    Leave a Reply Cancel reply

    You must be logged in to post a comment.

    • Register to become a Room151 user

    • Latest tweets

      Room 151 3 days ago

      Court rejects NHS trusts’ claim for millions in business rates relief: A judge yesterday threw out a claim by 17 NHS trusts that they are charities and should receive millions of pounds of business rates relief. Derby Teaching Hospitals NHS Foundation[...] dlvr.it/RL8F7D pic.twitter.com/fxt6Sor3Q7

      Room 151 3 days ago

      Authorities turn away from PWLB in favour of borrowing from peers: Councils borrowed just £80m through the Public Works Loan Board (PWLB) during the first full month since the Treasury’s rate rise, a mere 4% of August’s total. Just two authorities[...] dlvr.it/RL8F57 pic.twitter.com/zIOf1KlNpc

      Room 151 4 days ago

      County introduces new rules after £9.1m funds gaffe: A report to Hertfordshire’s most recent audit committee meeting said the “treasury control failure” had come to light in August, one day after the multi-million-pound redemption was not received.… dlvr.it/RL5DP0 pic.twitter.com/6LvY71zUew

      Room 151 4 days ago

      News just in - #WorkingtonWoman is believed to represent roughly half the electorate in Workington.

      Room 151 5 days ago

      LGPS urged to put the ‘social’ back into ESG: LGPS committee members and managers have been asked to elevate the importance of the “S” in ESG (environmental, social and governance) to help protect workers’ rights as the world confronts[...] dlvr.it/RL1c9p pic.twitter.com/xv590d3qm8

      Room 151 5 days ago

      Room 151’s top 10 news stories of 2019 room151.co.uk/treasury/room-… #localgov

      Room 151 6 days ago

      Room 151’s top news stories of 2019: As an eventful year for local authority treasurers draws to a close, Room 151 takes a look at the top 10 stories from the sector during 2019. 10. Spending watchdog[...] dlvr.it/RKy49q

      Room 151 1 week ago

      Council files £130m claim against PFI contractor for post-Grenfell estate costs: London Borough of Camden is suing a former PFI partner and its main subcontractors for £130m for costs relating to the evacuation of one of its housing estates the week[...] dlvr.it/RKkR8C pic.twitter.com/zIfQcikMjq

      Room 151 1 week ago

      Review highlights ongoing financial management issues at Northamptonshire: Northamptonshire County Council’s new section 151 officer should draw up plans to repatriate powers from government commissioners amid ongoing problems with financial management,… dlvr.it/RKjLkN pic.twitter.com/tQIxMDawQV

    • Categories

      • 151 News
      • Agent 151
      • Blogs
      • Chris Buss
      • Cllr John Clancy
      • Dan Bates
      • David Crum
      • David Green
      • Development
      • Forum
      • Funding
      • Graham Liddell
      • Ian O'Donnell
      • Interviews
      • Jackie Shute
      • James Bevan
      • Jobs
      • LGPSi
      • Mark Finnegan
      • Recent Posts
      • Resources
      • Richard Harbord
      • Stephen Fitzgerald
      • Stephen Sheen
      • Steve Bishop
      • Technical
      • Treasury
      • Uncategorized
    • Archives

      • 2019
      • 2018
      • 2017
      • 2016
      • 2015
      • 2014
      • 2013
      • 2012
      • 2011
    • Previous story LGPS funds to be limited to their pools by 2020
    • Next story PSAA begins as Appointing Person for public sector audits

    © Copyright 2019 Room 151. Typegrid Theme by WPBandit.

    We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK