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Please note: Forecasts are based on assumptions, estimates, opinions and hypothetical models or analysis which may prove to be incorrect.

Christian Nolting, Global Chief Investment Officer, Deutsche Bank Wealth Management

Jan. 07, 2019

As we start 2019, we are looking down from one investment landscape (in terms of macroeconomic, policy and corporate environments) to a markedly different one. Over the last few years, we have seen many “peaks” – peak liquidity and then, probably, peak growth in GDP and corporate earnings in 2018. By contrast, prolonged market volatility in the closing weeks of last year suggests that 2019 will be more uncertain as markets struggle to reassess the new investment reality, given a range of apparently intractable geopolitical risks, most obviously U.S./China trade relations.

But, looking through the market noise, I think that it is possible to identify a number of themes that will run through the coming year. This year we have chosen six themes, based around the macroeconomic outlook, market conditions and the major asset classes. They can be summarised as follows:

Growth deceleration
Theme 1: Economy

Growth deceleration

Global growth is slowing and becoming less synchronised. As the U.S. upswing matures, Europe will suffer from political uncertainty and risks remain around China. But, despite monetary policy tightening, growth will not collapse.

Vigilant on volatility
Theme 2: Capital markets

Vigilant on volatility

Markets are struggling with the transition to a more normal policy environment. Other underlying volatility triggers will remain – including geopolitics, and softer GDP and earnings growth. Lower returns are likely for a given level of risk.

U.S. yields on the return
Theme 3: Fixed income

U.S. yields on the return

After a decade, we have got used to low yields on bond investments. Now, in the U.S. at least, this is changing, with the short end of the yield curve now attractive. Other fixed income opportunities exist, but so do risks – be selective.

Watch the video
Earnings ease
Theme 4: Equities

Earnings ease

Looking through recent volatility, global equities still have a lot going for them. Earnings growth could however fall short of expectations as global markets adjust to reality – as a result, we expect lower but still positive 12-month equity returns.

U.S. dollar and oil centre-stage
Theme 5: FX & commodities

U.S. dollar and oil centre-stage

We expect continued U.S. dollar strength in early 2019, but think that it will be gently eroded during the course of the year. After a sharp decline in oil prices at the end of last year, supply constraints should support some recovery in 2019.

Long-term investment – Tech transition
Theme 6

Long-term investment – Tech transition

Our “tomorrow’s themes today” now include ESG (environmental, social, governance) and enhanced infrastructure investment. But this may be the year to re-evaluate preferences within the tech sector as regulation bites and sector trends diverge.

Watch the video

The report “Beyond the peaks – Investment themes for the world ahead” has further sections on multi asset and alternatives investment.  It also includes our new macroeconomic and financial market numeric forecasts for 2019.

The following regional editions of the full report are available for download: 

CIO Insights - Beyond the peaks - 2019 (Europe EN)

 

CIO Insights - Beyond the peaks - 2019 (Americas EN)

 

CIO Insights - Beyond the peaks - 2019 (Emerging Markets EN)

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S. No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Investments come with risk. The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk. CIO Office, Deutsche Bank Wealth Management, Deutsche Bank AG - Email: WM.CIO-Office@db.com.

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