After a strong rebound that saw Global equities gaining 17.4% in the first half of 2019, we are now entering seasonally weaker summer months. This weakness is further amplified by US-China trade risks dominating global market concerns. Citi analysts see markets as unprepared for the heightened risk of a prolonged economic struggle that could extend beyond the two economies and as a result, a period of de-risking within equities should be expected.
Nevertheless, Citi analysts still expect global growth of 2.9% in 2019 paired with steady inflation of 2.4% for 2019. Importantly, financial conditions are accommodative as monetary policy is expected to be on hold in most developed markets. If the current weakening in financial conditions and negative trade impact spreads to overall domestic economic weakness, the US Federal Reserve (Fed) could follow financial markets with interest rate cuts.
Given that market volatility is anticipated to remain elevated, Citi analysts believe that a highly diversified multi-asset class portfolio approach remains essential in today’s environment.