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

Oct. 01, 2019

There is a risk, in a time of prolonged economic uncertainty, that you become blinded to the pitfalls ahead. U.S./China trade tensions have now been ramping up for over a year, and other geopolitical tensions for even longer (Brexit for over three). But while we have suffered bouts of volatility, markets have not fallen into a more prolonged period of gloom.

 

To a great extent, this has been due to continued efforts of central banks, with the Fed, ECB and Bank of Japan recently loosening policy in anticipation of further economic weakness. As a result, economic growth and financial markets have been supported, even though these are not the primary goals of central banks. 

 

Even though times have changed since the beginning of the year, we still feel comfortable with the six themes that we highlighted in January.

Six themes update
Growth deceleration
Theme 1: Economy

Growth deceleration

Slower economic growth is already a reality in most of the world's major regions, with a few individual economies possibly in recession. This presents an uncertain background for financial markets. The key issue now is whether the U.S. economic growth engine will start to stutter in the face of trade and other pressures. But, as we argue, a recession in the U.S., or globally, is not an imminent threat.

Vigilant on volatility
Theme 2: Capital markets

Vigilant on volatility

Financial markets in 2019 have not yet had a bout of equity market volatility as severe as in late 2018. But one cannot be ruled out. In addition to the usual late-cycle problems, there are the contributing factors of trade and other geopolitics – as well as a growing realization that markets are still dependent on central bank support.

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

U.S. yields on the return

While core government yields have declined much more than expected, our advocacy at the start of the year for a selective approach remains valid. In a world increasingly dominated by negative-yielding debt, some fixed-income segments (for example some emerging markets debt or high yield) may still appeal.

Earnings ease
Theme 4: Equities

Earnings ease

Actual corporate earnings – and expectations around future profitability – have been easing down, although we think that market estimates for Q4 2019 could still be unrealistically optimistic. Despite continued central bank policy support, we think that equities may provide only modest gains over a 12-month horizon.

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

U.S. dollar and oil center-stage

Our expectation that the U.S. dollar would not backtrack significantly against the euro has proved broadly correct: the main point now is to what extent trade-related issues will create political headwinds for the greenback. Meanwhile, oil demand concerns seem likely to counterbalance worries about supply disruption.

Long-term investment: Tech transition
Theme 6

Long-term investment: Tech transition

Reversals in some individual technology stocks should not blind us to tech’s role in the many exciting structural changes in the global economy. As we note, investor interest in ESG continues to grow and fiscal policy changes could have an impact on another focus area: infrastructure.

 

The report “Stay prepared – Investment themes and forecasts update" includes our current macroeconomic forecasts for 2019 and 2020, as well as our 12-month market forecasts. 

 

To download a print-ready pdf of the full report, please click here.

 

To view a mobile-optimised version of the full report, please click here.

You may also be interested in

Cracked, but still intact – How long will markets defy the economic slowdown?

We update our six key investment themes for 2019 in light of economic and market developments in the first half of 2019.

  • Jul. 08, 2019
  • |
  • 5 mins read

Establishing a new altitude – investing beyond the peaks

We update our six key investment themes for 2019 in light of economic and market developments so far this year.

  • Apr. 09, 2019
  • |
  • 5 mins read

Tomorrow’s Themes Today: ESG and Enhanced Infrastructure

This year’s entries to our list of long-term strategic investment themes reflect our view that 2019 will be a year of ‘tech transition’.

  • Mar. 28, 2019
  • |
  • 4 mins read

Beyond the peaks: 2019

We face a new investment landscape in 2019. Discover our six investment themes for the world ahead.

  • Nov. 06, 2019
  • |
  • 5 mins read

Markets on the move: riding the road ahead

Markets on the move: our new quarterly Insights report explains how to ride the investment road ahead.

  • Oct. 24, 2018
  • |
  • 2 mins read

Carefully does it: stay invested but hedge

We are now late in the economic cycle and this has pushed up market volatility – as have trade and other tensions. But historically a late-cycle environment has often delivered decent returns too. So stay invested, but hedge.

  • Jul. 25, 2018
  • |
  • 2 mins read

The content and materials on this website may be considered Marketing Material. The market price of an investment can fall as well as rise and you might not get back the amount originally invested.  The products, services, information and/or materials contained within these web pages may not be available for residents of certain jurisdictions. Please consider the sales restrictions relating to the products or services in question for further information. Deutsche Bank does not give tax or legal advice; prospective investors should seek advice from their own tax advisers and/or lawyers before entering into any investment.