The start of the new year has many analysts discussing what the year ahead might bring and how to positions portfolios for them. I can fully appreciate the start of the year as a new beginning to the investment process but the last quarter of the year has provided most of the insight we need to assess how the markets will fare this year.
Markets started lower from bad manufacturing data coming out of China, this is a continuation of the concerns that the engine of global growth is slowing down. There will be no easing of these concerns without the Chinese government taking action to stimulate the economy. Concerns over the debt loads of companies are also a concern and will be looked at closely.
UK Manufacturing PMI came in better than expected but was attributed to large inventory build ups in preparation to Brexit disruptions that could come about in March from a disorderly withdraw from the EU. This will be a very important, and news dominating, event that will dictate currency and market movements for the first quarter. European parliamentary elections will have a large effect on the unity of Europe and further integration (or dis-integration) but will not get the same market attention as Brexit I fear.
In the US the markets open 2019 with the government shutdown still in effect. As the newly elected leaders are sworn in, you can expect more headlines (hopefully for the better) coming out this week to dictate market sentiment. The points of contention are the same as we have seen last year, deficit spending, campaign promises and partisan politics generating uncertainty in the markets.
None of these problems started in 2019 but will definitely shape the outcome of the new year. As the predictions for 2019 market performance come in, their accuracy is dependent on a lot more political outcomes than cyclical and economic trends. The only accurate prediction at this stage is that 2019 will bring uncertainty and opportunity.