Investment Views

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May 2019

Here we summarise our Investment Committee's immediate outlook for the primary asset classes and major equity markets.

Investment Views for May 2019

  • Positive
  • Neutral
  • Negative
Asset Class Current View Outlook

Despite hard data and a range of business surveys indicating that the world economy has continued to slow, global growth surprised on the upside in Q1 with the US, the eurozone and China delivering stronger than expected growth. However, leading indicators point to continued weakness in world trade as well as global manufacturing. Slowing jobs growth and flat wage growth will likely lead to falling consumer confidence. But with little sign of a recession any time soon and every indication that central banks will continue to be supportive, we favour equities on a relative basis.

Fixed Interest

Although the average OECD headline inflation increased in March to 1.7%, primarily due to an increase in energy prices, this is thought to be temporary. Meanwhile, core inflation (which excludes energy and food costs) declined to 1.6% which, coupled with the continued slowdown in global growth, suggests that interest rates are unlikely to rise in advanced economies any time soon. Sovereign bonds can be a safe haven in periods of heightened uncertainty, but corporate debt continues to carry a yield premium.


Brexit uncertainty and the slowdown in economic growth are holding back business investment in both the UK and the euro-zone and are a dampener on returns. However, yields currently continue to enjoy a premium over government bonds. A change of government in the UK could present a risk to the sector.


Industrial commodities – prices are expected to suffer in the coming months as Chinese manufacturing remains soft and given subdued global economic growth. World aluminium prices have fallen sharply reflecting Chinese production and export levels.

Oil – recent prices rises primarily reflect the US decision to cancel sanction waivers to countries importing oil from Iran. However, the weakness of global growth, a pick-up in US oil supplies and heightened levels of risk aversion could cause the oil price to fall later this year.

Gold – demand grew in Q1 as the central banks of Russia, China and other Emerging Market economies continued their efforts to trim their US dollar exposure. With its safe-haven qualities and the US dollar expected to weaken, we expect demand for gold to grow.

Absolute return – offers the potential to dampen volatility and provide some downside protection, but returns are often moderate at best.


With the BoE stating that any rate increases would be ‘gradual and to a limited extent’, and with Brexit uncertainty still an issue, UK rates are unlikely to rise in the short-term and so cash currently serves only as a diversifier, helping to reduce portfolio risk by dampening volatility.

Equity Region Current View Outlook

The economy remains remarkably resilient and continues to outperform the eurozone. Nevertheless, Brexit-related political uncertainty dominates the headlines creating uncertainty for businesses, dampens investment plans and demand and also limits growth prospects in the short term. Sterling’s relative value is likely to dictate the market direction until the ‘fog’ of Brexit clears, especially given the constituents of the FTSE 100.


The US economy currently paints a ‘goldilocks’ picture with robust economic growth, low unemployment, static wage growth, low inflation and low interest rates. A soft-landing is more likely than a recession, but with equity valuations near historical averages we maintain our neutral stance.


Economic data remains soft and could even fall further from current levels. Global trade issues, Brexit, continued austerity, and headline risk around European elections continue to act as headwinds. Consumer confidence fell in April having already fallen a long way during the last 12 months. China remains an important export market for the region and so the strength of its economy is pivotal.


Economic data released in April was mixed at best, with industrial production falling more sharply than expected. Inflation is expected to turn negative in the coming months, but with the Bank of Japan already applying stimulus it is questionable what further measures it could take to boost growth. Potential headwinds are the consumption tax hike in October this year, a breakdown in the trade negotiations, and a stronger yen (reflecting its safe-haven qualities).

Asia Pacific and Emerging Markets

Although we expect the pace of growth in emerging Asia economies to be relatively weak this year, the fundamentals remain largely positive and current valuations remain attractive. Fiscal and monetary easing in China are in the pipeline to counteract a slowdown and this should improve China’s growth and spill over to other economies within the region. Outside China growth among other emerging economies looks to be relatively flat. A trade agreement between China and the US is expected to be greeted positively by the markets. Any strengthening of the US dollar, against expectations is a key risk.

Risk warning: Investors should be aware that past performance of investments is not a reliable indicator of future results and that the price of shares and other investments, and the income derived from them may fall as well as rise. The content of this bulletin is for general information and reflects the general market view of Parallel Investment Management Ltd. - it should not be interpreted as recommendations or advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of the content.

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