Wed 16 Jan, 2019

How to invest in 2019

Disclaimer: This post on how to invest in 2019 is for educational purposes only and is not to be deemed financial advice or a personal recommendation. The content of this article may not be suitable for your personal circumstances.

It’s a new year and along with a hangover from the Christmas and New Year’s Eve festivities, we enter 2019 with a renewed set of goals for both financial, personal and retirement.

 

But on the back of a rocky 2018 for investors around the world, how will 2019 fare in working towards your long term retirement goals?

 

Jack Bogle, founder of Vanguard Group and creator of the index fund, warned investors to prepare for 2019 by decreasing exposure to stocks and increasing investment in defensive strategies, such as fixed income securities like bonds.

 

Bogle stated that, “Trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword,” Bogle told Barron’s. “If you were comfortable at a 70 percent to 30 percent [allocation to stocks and fixed income], under these circumstances you’d like to go back to 60 percent to 40 percent, or something like that.”

 

Yep. Unfortunately he’s not the only one as many leading experts fear that 2019 could be the year the world slides into a global recession. It’s obvious to see that the global economy has slowed and there is endless talk about whether yield curve inversion in the US is a credible tool for predicting a recession.

A representative of Morgan Stanley  says investors should stay away from stocks with high earnings expectations and high valuations, many of which can be found in the tech sector. The commentator stated that valuations in the tech sector have exceeded earnings growth, creating a unique vulnerability in the sector.

 

With Brexit and the US Government shutdown dominating the global headlines, there are certainly uncertain times ahead for investors and although financial forecasts can be uncertain at the best of times, the current outlook

But is the outlook as pessimistic as the headlines and articles suggest?

The global GDP is set to grow 3.6% in 2019, which may be slower than the forecast and actual growth for 2018 – but is growth nevertheless. So where is this growth expected to come from?

 

The answer could lie in Emerging Markets.

Morgan Stanley’s 2019 Outlook stated that. “Although they are more prone to extreme ups and downs, emerging markets as a whole typically grow at a faster pace than developed markets. In 2018, that pattern diverged, as U.S. economic growth picked up and emerging markets contended with rising U.S. interest rates and a strengthening dollar. “This, coupled with trade tensions, rendered emerging-market economies nearly defenceless against the barrage of negative external headwinds,” says Ahya.

Although emerging economies still managed to expand 4.8% in 2018—more than twice the rate of developed markets—weaker growth in these markets, relative to developed nations, ultimately resulted in slower overall growth in the second half of the year.

Now the pendulum is set to swing back in favour of emerging markets. “

 

So how will you be investing in 2019?

 

If you’d like to speak to one of our SMSF team on your plans for this year, contact our SMSF experts today.