The downward revision of global growth forecasts (to around 3% for 2019 and 2020) is now well established in the minds of investors. Although the abrupt slowdown in 2018 has little in common with those previously seen in 2012 and 2016, it is true to say that, as in the past, it provoked an immediate reaction from the central banks. Commodities posted one of their best performances for a century. If the start to the year plays out over a full-year, global and European equities are also expected to perform exceptionally well. It is unlikely, of course, that equities will record performances of more than 50%, but some funds and some management strategies could still have the effect of compensating for the unusual and disappointing year that was 2018. With the possibility that the cycle is coming to an end in mind, investors are increasingly directing their flows towards bonds.
Globally, this week bond subscriptions have also hit record highs not seen since June 2017. Once again, Brexit has played a significant role this week and, as expected, there’ll be no Hard Brexit on 12 April. A new deadline brings with it a certain degree of flexibility and various options, which should enable the British to come up with a solution and vote for the withdrawal agreement Theresa May has negotiated. And so the saga continues, but without troubling the markets too much, as they have now become accustomed to these never-ending votes. This Brexit business is becoming more and more like NASA’s planned mission to Mars. It will be long, costly, painful, dangerous and continually postponed. It is also by no means certain to end up being a “giant leap for mankind” to coin the famous words uttered by the American astronaut Neil Armstrong, the first person to step foot on the surface of the Moon.
Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in April 12th, 2019.
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