Macroscope | In 2018, cash outperformed most other asset classes. Will 2019 be different?

Tai Hui says a survey of the regional outlooks shows economic fundamentals remain stable going into a new year, though risks will persist

As has been the case this year, the complex mix of geopolitical tension and economic challenges specific to the region will keep investors on their toes

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A worker takes a break outside a construction site in Beijing. The US-China trade war is likely to extend into the new year. The potential for further damage should help deter the countries from taking their threats too far. But the uncertainty from the trade tension may lead the world’s business community to consider restructuring global supply chains. Photo: AP

Published: 10:30am, 23 Nov 2018Updated: 10:24pm, 23 Nov 2018

This year is turning out to be an unusual one for investment. Despite no major economic or financial stress in the advanced economies, cash outperformed most other asset classes. The valuation “de-rating” in global equities so far this year has been as severe as 2000 and 2008, the last two bear markets, even as corporate earnings continue to be solid.

Asia investors may feel defeated and deflated, begging the question of how economic fundamentals could turn out in 2019. Developed economies’ growth should peak in 2018, according to the International Monetary Fund. A global recession is not imminent, but some factors supportive of strong economic growth in 2018 are likely to fade.

The US fiscal stimulus that has helped push growth to around 3 per cent in 2018 should ebb to around 2 per cent in 2019. Meanwhile, rising interest rates in the US, which will probably continue in 2019, should also gradually lower corporate spending, given companies’ relatively high levels of leverage. As spare capacity to facilitate growth becomes scarce, US economic growth will rely on greater productivity, which is more difficult to achieve.

Consumers will remain a bright spot, supported by healthy household balance sheets and a strong job market.

Shoppers throng the Best Buy store at Northgate Mall in Seattle during the Thanksgiving holiday. Consumer confidence is high in the US, supported by healthy household balance sheets and a strong job market. Photo: TNS

Macroscope | In 2018, cash outperformed most other asset classes. Will 2019 be different?

Tai Hui says a survey of the regional outlooks shows economic fundamentals remain stable going into a new year, though risks will persist As has been the case this year, the complex mix of geopolitical tension and economic challenges specific to the region will keep investors on their toes

Tai Hui says a survey of the regional outlooks shows economic fundamentals remain stable going into a new year, though risks will persist

As has been the case this year, the complex mix of geopolitical tension and economic challenges specific to the region will keep investors on their toes