The Q1 2019 Global Outlook: Lower expectations from Barclays Research suggests that after years of strong returns and low volatility in the run-up to 2018, investors need to prepare for a world of lower returns and higher volatility.
Watch a three-minute video discussion of Global Outlook: Lower expectations with Ajay Rajadhyaksha, Head of Macro Research.
The report emphasizes that while the eurozone and other economies outside the US disappointed in 2018, non-US growth should stabilise near current levels, instead of weakening much further. And while we expect a near-term risk rally until year-end 2018, we forecast 2019 will be a year of low single-digit total returns in most large financial assets and higher volatility, especially if the end-of-year risk rally materialises.
This is by no means a call for the start of a bear market, but investors need to lower their expectations and be nimble. The good news is that 2019 returns are unlikely to be as bad as 2018.Ajay Rajadhyaksha, Barclays Head of Macro Research
The Global Outlook for Q1 2019 includes deep dives on several macro themes, including examinations of:
Against this backdrop, Global Outlook recommends an overweight allocation to higher quality US bonds, such as investment grade and agency MBS, over global equities.
Barclays Research remains positive on equities as the US economy surges ahead. Our analysts believe that neither global trade sanctions nor potential contagion from emerging markets are likely to upset this growth trajectory.