An extended cycle
Most years have a dominant theme that shapes financial markets. In 2017 it was the Goldilocks economy – not too hot, not too cold – and the return of politics as a market driver. Trade conflicts and interest rate concerns dominated 2018. Going into 2019, we believe that a significant focus will be on the factors that can prolong the economic cycle.
A significant focus will be on the factors that can prolong the economic cycle.
Drivers likely to extend the cycle
From technology and USD stability to emerging markets rebalancing, we review six key market drivers and risks in 2019.
- Keeping inflation under control
- US dollar stability
- China’s resilience
- Calmer European politics
- Emerging markets rebalancing
- Tech and healthcare innovations
The impact of US fiscal stimulus will likely peak in the course of 2019, but growth should remain above trend on the back of robust corporate capital expenditure, hiring and wage growth. In China, however, we are likely to see growth slow toward 6%. US tariffs, sluggish manufacturing investment and slowing consumption growth are likely to act as constraints.
The Investment Outlook takes a closer look not only at the Credit Suisse Supertrends, but also the field of sustainable and impact investing.
US financial markets entered a late stage of the economic cycle in 2018, characterized by rising interest rates combined with a flattening yield curve. Our base case for 2019 foresees only a moderate further increase in US yields. This suggests that US fixed income investors should prepare to lengthen duration.