High risks to impact equities and EMs with no signs of momentum change

Risks are high that global equities and emerging markets will be impacted by risk aversion next week.

The first few days of trading for financial markets in 2019 have obviously not been kind when you look at the global market selloff that has transpired.

However, there are no indications yet that there will be a change in this momentum and investors should prepare for more riskoff ahead.

Individual economies and corporations are now speaking out even louder regarding the impacts stemming from prolonged trade tensions on economic momentum at a time when most are already expecting a downturn in global economic output in 2019. Therefore, I would prefer to remain close to safe-haven assets next week.

Gold and the Japanese Yen are likely to remain supported, while the Dollar is another asset that I would closely monitor because it could pick up buying demand on safe-haven appeal during this period of market uncertainty.

I am a little concerned that the consensus is very bearish on the Dollar this year, meaning that shorting the Dollar is at risk to becoming an over-crowded trade. What investors need to remember during this period of heightened uncertainty is that the United States economy is still outperforming many developed economies and emerging markets in terms of economic output for a long time to stay.

As other economies ramp up the frequency of downgrading their expectations for growth in 2019, there is an opportunity for the Greenback to remain in demand as a result of the US economy outshining its peers.