Plain sailing or rough seas ahead for global markets?

March 5, 2019

Will economic headwinds or tailwinds prevail in 2019?

Our central economic scenario is relatively benign. We see a modest slowdown in global growth in 2019, with limited inflationary pressure. The implication is that interest rates rise only gradually in the U.S. and not at all in the euro area and Japan, while China loosens policy. Market participants have become sensitive to the degradation of fundamentals, even as the data remain overall positive and indicative of growth.

We foresee a tricky year ahead for investors. Our forecasts are for modest equity returns, with risks skewed to the downside. Bond returns should be positive, though the upside has fallen with recent market moves. Credit markets look vulnerable in places. In the absence of a strong directional beta call, the focus shifts to alpha and cash. We believe this environment may well suit a discriminating approach, favouring multi-asset strategies, high-quality equities and bonds, U.S. and EM equities, value over growth and active over passive.”

For our full analysis of potential economic scenarios and how they might impact bond and equity markets in 2019, visit our Market Insight’s page.

Alicia Levine, Chief Strategist and Shamik Dhar, Chief Economist, BNY Mellon Global Investment Strategy team

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All investments involve risk including loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.

Bonds are subject to interest rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines. Equities are subject to market, market sector, market liquidity, issuer, and investment style risks to varying degrees. Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries. Charts are provided for illustrative purposes and are not indicative of the past or future performance of any product.

Alpha measures the difference between a fund’s actual and expected returns, based on beta, and is generally used as a measure of a manager’s added value over a passive strategy. Beta measures a fund’s sensitivity to changes in a market, represented by the named index in the average annual returns table herein. A beta greater (lower) than 1.00 indicates that the fund is more (less) sensitive to that market's movements.

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Views expressed are those of the advisor stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Investment Adviser, Inc. and BNY Mellon Securities Corporation are subsidiaries of BNY Mellon.