The markets remain on a positive trajectory for 2019 to date with most global stock-markets gaining significant ground from the Christmas Eve lows of 2018. However, potential risks to the global economy should not be overlooked. Much uncertainty concerns the relatively larger global economies of the U.S. and China.
In the U.S., the yield curve is broadly flat. This is relatively unusual. Typically, interest rates on bonds increase in future years. The currently flat yield curve likely signals concern for future U.S. economic growth and, as a result, the prospect of lower U.S. interest rates. Despite this, current U.S. data, such as unemployment, remains robust.
In China, growth has recently slowed, albeit from China’s impressive growth rate when compared to most other economies. Contributing to this, the ongoing trade war between China and the U.S. remains unresolved at the time of writing, though upcoming deadlines may change this. Given the central importance of the U.S.-Chinese trading relationship to the global economy, news on the progress of trade negotiations continues to impact markets.
Of course, Brexit also remains a source of uncertainty. That situation, too, may progress with scheduled Parliamentary votes in mid-March The important thing to bear in mind for Moola portfolios is that the relatively high exposure to investments outside of the U.K. combined with some usage of currency hedging is expected to moderate the impact of Brexit ups and downs, when compared to solely U.K. focused investments.
As a result, 2019 has progressed well for investors so far, but concerns remain across major economies.