Repost: Outlook for 2019: best or worst of times?

What do you think of the investor’s stock market perspective for this year? Will it be the best or worst of times? Check out The Royal Gazette for more insights:

Potential catalyst: if China’s President Xi Jinping and US President Donald Trump strike a trade deal, markets are likely to gain strength


“It was the best of times, it was the worst of times …” begins a famous Charles Dickens novel. Unsurprisingly, this phrase has been repeated countless times in financial publications since Dickens wrote A Tale of Two Cities in 1859. Over the past few decades we have seen clear examples of both good and bad times in the global economy. Certainly, last year’s stock market plunge in the final quarter was not the best of times for investors, even though the global economy continued to expand.


In terms of what’s next, investors seem to be forecasting the worst of times. Despite record corporate profits last year and consensus forecasts for respectable global growth of around 3.5 per cent in 2019, stocks, commodities and credit prices have lately veered to the downside, notwithstanding a recent bump up from December’s lows. In any event, we have now had official market corrections of about 20 per cent on all the major stock market averages.


Market nervousness has also been evident in the credit space. Substantially higher credit spreads, or the additional amount of yield investors require in order to underwrite the risk of owning corporate bonds, have expanded to levels typically seen during periods of recession.


For example, last December, high yield bonds experienced their worst month since 2011. However, incoming economic data does not support a recession thesis — at least not at the moment.


The most critical market headwinds are the US-China trade war, tightening central bank monetary policies and likely, concerns over an unruly Brexit negotiation. Market direction going forward will therefore be determined by political leaders rather than traditional market forces. No wonder cautiousness prevails.


Continue reading HERE.