2019 may be a re­peat of 2018

Money Times - - Bazar.com -

2018 has been a year of sharp ups and downs. “Eco­nomic slow­down, shrink­ing cen­tral bank bal­ance sheets and con­tin­ued bouts of volatil­ity will make 2019 no bet­ter than 2018 for risk ad­justed in­vest­ment re­turns”. Ex­pect bet­ter but still low re­turns in 2019 for multi as­set global al­lo­ca­tion port­fo­lios wrote Gold­man strate­gists in­clud­ing Chris­tian Mueller-Gliss­man in a note last week. While the de­cline in val­u­a­tions across as­set classes has im­proved the medi­umterm out­look, Gold­man sees a weaker than ex­pected macro back­drop in 2019 that will limit the re­turn po­ten­tial. J.P. Mor­gan, an­other in­vest­ment banker, shares the same opin­ion and be­lieves that cash is bet­ter than stocks for the first time in a decade. Ac­cord­ing to the firm, cash isn’t only a safe place to in­vest, but it now of­fers a bet­ter risk-ad­justed re­turn than eq­ui­ties. Although this rec­om­men­da­tion was di­rected more to­wards US stocks, it is equally valid for In­dian stock mar­kets. This re­port pub­lished by the firm’s multi-as­set strat­egy team, with $260 bil­lion un­der man­age­ment, up­graded its rec­om­men­da­tion on US cash to over­weight for

2019. For the first time in ten years, in­vestors can get a lot more from safe, liq­uid se­cu­ri­ties than from the S&P 500 In­dex ad­justed for volatil­ity.

Trade war fears the world over have ig­nited the slow­down in earn­ings growth and ris­ing macroe­co­nomic risks. These fears will weigh on eq­ui­ties but sit­ting on cash may de­risk the port­fo­lio how­ever bor­ing it may ap­pear. If J.P. Mor­gan turns

out right, be­ing bor­ing may turn out to be the key to suc­cess in 2019, just like in 2018. The fear of 2019 turn­ing into a damp­ener like 2018 is re­flected in the somber mood at Dalal Street de­spite the fall in Brent Crude prices, the strength­en­ing Ru­pee and ris­ing for­eign in­flows. An­a­lysts are in no mood to en­hance com­mit­ments and have down­graded nearly 300 stocks out of 407 on their radar. Po­lit­i­cal hum­drums, mandir, cor­rup­tion, are some of the is­sues that will keep the mar­kets on ten­ter­hooks. This assem­bly re­sults may pave way for the long shot. If the BJP wins, the mar­kets will surge but its de­feat in the ma­jor states will be a great set­back to the Cen­tre and will give a sen­ti­men­tal push to the ‘ma­ha­gat­band­han.’

The mi­cros of a com­pany may give some foothold to its share price but the macros are vul­ner­a­ble. The mar­ket may re­main neg­a­tively skewed till the gen­eral elec­tions next year and af­ter smart an­glers ex­cel­lent op­por­tu­ni­ties to en­ter the mar­ket and choose stocks at bar­gain prices.

But if the BJP feels con­fi­dent of win­ning the 2019 gen­eral elec­tions af­ter this week’s assem­bly re­sults, the Lok Sabha elec­tions may be pre­poned and the congress and its al­lies in the ‘Ma­ha­gat­band­han’ will have to de­vise a new strat­egy. Till then, let cash rule your as­set al­lo­ca­tion and liq­uid­ity be the monarch.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.