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Humanising Finance
January 2019
Formulating Your Investment Strategy for 2019
     

Formulating Your Investment Strategy for 2019

 
Humanising Finance sits down with Maybank Wealth Management Research team, and got them to answer a few burning questions on the macroeconomic and investment outlook of 2019.
 
1. How would you describe the macroeconomic outlook in 2019?
 
We are in the late investment cycle now, given that global growth has plateaued and is likely to remain languish in the new year. While we see the United States (U.S.) in a maturing business cycle, we do not expect a recession this year as the typical economic stress points such as housing and unemployment statistics are not flashing red just yet.

Nevertheless, there would be four things that will keep us awake at night. First, the higher U.S. interest rates and the shrinking Fed's balance sheet will tighten monetary conditions. Second, the political backdrop in Eurozone remains a headwind given the uncertainties of the Brexit. Third, the stability and security of the broader Middle East as the partnership between the U.S. and Saudi Arabia is increasingly under pressure. And last, both the U.S. and China could struggle to resolve their escalating economic cold war. All these four issues will result in heightened market volatilities.
 
2. What is the forecasted interest rate environment this year?
We expect the U.S. Fed to hike rates twice given the elevated inflation, despite the slowing growth outlook and fading stimulus in the country.

Elsewhere, central banks in the United Kingdom and Canada have also started raising interest rates and Bank of Japan (BOJ) is also signaling its willingness to take on a more flexible approach to purchases of long-term Japanese Government Bonds (JGBs). European Central Bank (ECB) might also start to hike interest rates this year before its president Mario Draghi steps down in October.
 
3. What is the investment approach you recommend in 2019?
 
Prudence and capital preservation will be the investment mantra for 2019 given the late investment cycle. Investors should also diversify their portfolio to tide through periods of stress and turbulence in markets.
 
4. Which asset classes do you think will do well?
Investors should stay defensive in both equity and fixed income and look at alternative investments to help reduce overall portfolio volatilities.

Gold would be one of the attractive alternative assets to add into our portfolio. Gold prices have not caught up with the general increase in price inflation and we have also seen rising demand from various central banks.

We also favour Asian bonds for their high credit quality and defensive characteristics.
   
 
Speak with a Maybank relationship manager for a full report and an analysis of your investment profile.
 
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