Risks assets have further to run in 2019 and genuine diversification is crucial to drive returns amid heightened volatility, according to Aberdeen Standard Investments. The firm’s strategist and investment manager set out their expectations for markets next year in an event called 2019 Market Outlook: Investing in a world of uncertainty, hosted by Aberdeen Standard Investments Indonesia. The event was held on 15 November 2018 at Shangri-La Hotel Jakarta, featuring a keynote speech from Fauzi Ichsan as the Chief Executive Officer of Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan or LPS), and four investment experts from Aberdeen Standard Investments global.
This half-day event was packed with investment insights and global outlook across asset classes for 2019. Over 130 attendees were greeted with a keynote speech by Fauzi Ichsan, followed with an opening remarks from Omar S. Anwar, President Director of PT Aberdeen Standard Investments Indonesia. A total of four sessions were packed into this half-day event:
- Session 1: 2019 Market Outlook by Andrew Milligan, Head of Global Strategy
- Session 2: Multi-Asset Outlook & Capability by Dongyue Zhang, Investment Director, Multi-Asset
- Session 4: Fixed Income Outlook & Capability by Kenneth Akintewe, Head of Asian Sovereign Debt, Fixed Income - Asia
Andrew Milligan identifies five drivers that will shape the investment landscape in 2019 when he delivered his presentation in the first session:
- Growth Positive but Slower The global economy is set to grow further next year, albeit at a slower pace than in 2018, as long as core inflation remains under control and monetary policy tightening is steady.
- Return to Greater Volatility After an unusually long period of calm for markets, the recent correction has priced in the risks of a macro slowdown and political unrest. We anticipate a 5-15% correction in global equities in 2019.
- Political Tensions to Roil Markets US policy after last week’s midterm elections will be critical for the outlook for markets, while political populism could disrupt financial markets in Europe and beyond. Any major escalations in US-China trade conflicts will derail markets and, in a world of integrated supply chains, tariffs are a blunt tool that can dampen business confidence. The hardest hit could be some Asian economies such as Malaysia, South Korea and Thailand, where much of the value-add embedded in Chinese exports to the US originates from.
- Monetary Divergence to Widen Fiscal stimulus has ensured the US growth cycle is out of sync with the rest of the world. The divergence in the pace of monetary tightening will put some developed and emerging markets under pressure and drive currency volatility. A stronger dollar means life will get more difficult for those emerging economies that borrow heavily in dollars. Should China run out of room for policy manoeuver and allow the renminbi to depreciate sharply, this would put further pressure on many Asian countries.
- China Takes Centre Stage As China extends its influence over the global economy and markets there are two key questions for 2019: how its relationship with the US will evolve; and the extent of its policy stimulus to support growth. If the US takes a much harsher approach to China, it will disrupt not only trade, but also technology transfer; industrial espionage; China’s influence with its Asian neighbours through One Belt One Road; and even the balance of power in the Pacific.
Aberdeen Standard Investments is the investment arms of Standard Life Aberdeen plc, focusing on asset management business. As of 30 June 2018, Aberdeen Standard Investments has managed £557.1 billion (US$735.5 billion) of assets, with clients spread in 80 countries.