State Street Global Advisors’ 2019 Global Market Outlook: US Shines Brightest, But Prepare to Pivot as Opportunities Shift
BOSTON & LONDON & HONG KONG--(BUSINESS WIRE)--Nov 28, 2018--State Street Global Advisors, the asset management arm of State Street Corporation (NYSE: STT), today released its Global Market Outlook for 2019 – Not Over Until It’s Over. While mindful of the risks to the longest bull equity market in history, State Street Global Advisors believes US equities will still benefit from the last vestiges of fiscal stimulus and strong consumer spending in the first part of 2019. But opportunities are likely to shift to other regions and sectors in the second half of the year, depending on how policy tightening, trade disputes and geopolitical events play out in emerging markets and Europe.
Given the maturity of the current cycle, State Street Global Advisors expects to see bumpier markets in 2019. Therefore the firm suggests a more cautious return-seeking approach, with a diverse combination of defensive equities, high-quality credit and select emerging market exposures across equities, currencies and local currency bonds.
Geopolitical risks in Europe look set to weigh on stocks, especially in the UK as its departure date from the European Union draws closer. Political concerns will likely impact the euro and sterling, amid EU budget disputes with Italy and continued Brexit uncertainty.
The firm believes the guilt-by-association sell-off in emerging markets in 2018 has created some attractive buying opportunities, provided not all the risks already priced-in materialize in 2019. The country to watch will be China, which must balance continued economic growth with its growing debt burden and damage from US tariffs.
“China matters most among emerging markets for global investors in 2019,” said Rick Lacaille, global chief investment officer for State Street Global Advisors. “Not only is it an important driver of global growth, it is also increasingly important to global markets as major emerging market equity and debt indices begin to include onshore Chinese securities. Moreover, markets are only beginning to digest what a fundamental shift in relations between the US and China might mean for future growth.”
For fixed income investors, caution and quality are the watchwords for 2019 as the US Fed continues to raise rates and drain liquidity as it unwinds its balance sheet. Credit, therefore, warrants caution at this late point in the cycle, and the firm continues to focus on higher-quality issuers. For fixed income investors looking to take risk, State Street Global Advisors sees value opportunities in local currency emerging market debt and currencies. Lastly, with US short-term rates moving higher, cash-like holdings appear more attractive than they have in years, and there should be opportunities to use short-term currency moves to make long-term strategic hedging decisions.
“Given we expect higher volatility in 2019, investors may want to increase their dry powder,” said Lori Heinel, deputy global CIO for State Street Global Advisors. “While the current cycle isn’t over until it’s over, building in strong defenses now should help navigate late-cycle volatility and uncertainty in the months to come.”
To view the full Global Market Outlook, click here.
About State Street Global Advisors
For four decades, State Street Global Advisors has served the world’s governments, institutions and financial advisors. With a rigorous, risk-aware approach built on research, analysis and market-tested experience, we build from a breadth of active and index strategies to create cost-effective solutions. As stewards, we help portfolio companies see that what is fair for people and sustainable for the planet can deliver long-term performance. And, as pioneers in index, ETF, and ESG investing, we are always inventing new ways to invest. As a result, we have become the world’s third largest asset manager with nearly US $2.81 trillion* under our care.
* This figure is presented as of September 30, 2018 and includes approximately $28 billion of assets with respect to SPDR products for which State Street Global Advisors Funds Distributors, LLC (SSGA FD) acts solely as the marketing agent. SSGA FD and State Street Global Advisors are affiliated.
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PUB: 11/28/2018 09:15 AM/DISC: 11/28/2018 09:15 AM