The deVere Group has urged investors to remain invested and diversify after it compared global driving and breaking factors on returns.
The independent financial advisory organisation says stock market falls mean that valuations are attractive across sectors.
Also, in spite of global growth expectations falling over recent months, it still expects corporate profits to continue growing in 2019, in particular in the US.
But factors that could slow investor return include the trade dispute between China and the US, higher Treasury yields, higher inflation and the ongoing uncertainty of Brexit.
US-China trade war predictions
DeVere’s chief executive officer Nigel Green predicted in July 2018 that the Trump trade war with China would trigger a chain reaction of negative events worldwide.
His prediction came after US president Donald Trump’s administration announced the third round of tariffs on Chinese goods, at 10% on $200bn worth of exports.
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Green warned that the trade war would lead to higher inflation in the US and that a stronger dollar would increase stress in emerging markets.
Since then, Trump and Chinese President Xi Jinping agreed to hold off further tariffs until March 2019, which were expected to go from 10% to 25%.
Negotiations may have been successful, as Business Insider reports China’s “first official trade war truce” in a purchase of US soybeans.
Pushing the boat out on investments
DeVere chief executive officer Nigel Green said: “History teaches us that stock markets go up over the long term, so I would urge investors to remain invested. No-one wants to miss out on returns.
“The main headwinds that could drag on investor returns include the ongoing trade dispute between the world’s two largest economies; higher Treasury yields, which will raise the risk-free rate of capital; higher inflation; and the uncertainty of Brexit.”
He added that there are three key tailwinds propelling positive investor returns.
“First, following the stock market falls in recent months, valuations are attractive in many sectors and countries, relative to the returns on cash and likely corporate earnings growth. Emerging markets, in particular, are offering value.
“Second, global growth expectations have been reduced in recent months But with global GDP growth in 2019 likely to be 3% plus, we expect continued corporate profits growth in many of the major economies and in particular the US.
“In addition, the US Federal Reserve has signalled that next year’s planned interest rate hikes may be delayed if economic data weakens, which last week’s relatively modest payrolls data and November’s inflation data suggest is the case.
“Should the Fed push back raising rates, this will help support the US, and therefore the global, economy.
“And third, the world’s financial system is in a much better condition.
“Banks and other financial institutions have significantly enhanced their capital levels over the last decade, making them more capable to withstand defaults on loans.”
He warned that: “Investors need to ensure that their portfolios are well diversified, meaning across asset classes, sectors, regions and even currencies.
“This is the best way to mitigate risk and take advantage of the important and rewarding opportunities.”
The impact of the US-China trade war in Indonesia
In November, Indonesia was the latest casualty of the trade war, with GDP growth slowing due to a reduction in exports.
The way Indonesia’s GDP is being affected by the trade war demonstrates that predictions about its impact are correct.