In the year ahead, Citi analysts expect global growth of 2.7% paired with steady inflation, also at 2.7%. While geopolitical risks continue to weigh on sentiment and bouts of volatility can be expected, it may be too early to call the end of the 11-year bull market.
US/Iran tensions took a major turn toward escalation recently, before de-escalating towards end of the week. Citi analysts see a low probability for geopolitical events to drive lasting turning points in the wider world economy. Diversified investors should build portfolios that they can comfortably live with under adverse scenarios.
Political developments in the UK and trade policy progress between US and China that have helped clarify a generally positive economic outlook. However, investors should keep an eye on the developments in US and Middle East.
The Citi Private Bank Global Investment Committee (GIC) raised the asset allocation to Global Equities from Neutral to Overweight at the recent November meeting. To fund this, the Global Fixed Income Underweight was deepened, primarily from the decrease in allocation to Eurozone government bonds. Cash was also reduced from Overweight to Underweight while Gold remained at Overweight.
Citi analysts expect global growth of 2.7% in 2019 paired with steady inflation of 2.4% for 2019. Financial conditions remain supportive as central banks around the world cut interest rates this year to offset the economic slowdown.
Many investors were concerned over the inverted US yield curve and recessionary fears. The inversion was due to the Federal Reserve’s (Fed) excessive tightening steps in 2018 amid rising US-China trade tensions. Citi analysts believe the turn to easing by the Fed and numerous other central banks, as well as a likely more cautious approach to trade negotiations, could help to cushion risk assets.
