Exchange-traded fund (ETF) provider Blackrock has provided its 2019 global investment outlook. It has identified new market themes and updated its asset views for 2019.
Blackrock is a world-leading provider of ETFs, with a major presence in Australia. It claims that iShares Core ETFs are less than a sixth of the cost of the average Australian managed fund. One of the funds it offers is iShares S&P 500 ETF (ASX: IVV).
Blackrock 2019 Global Investment Outlook
Global Growth Slowdown
Blackrock now thinks that global growth is going to slow in 2019, although it thinks the US growth will stabilise at a “much higher level” compared to other regions, even as the 2018 stimulus fades.
The asset management business said markets fear a downturn is near, although the risk of a US recession is low in 2019. Global earnings growth is also expected to moderate this year.
Ms Kate Moore, Chief Equity Strategist from the BlackRock Investment Institute, said: “We’re talking about a slowdown in the pace of economic growth, not necessarily an end to the expansion.”
Blackrock said that trade frictions remain elevated, but look more priced in by markets than a year ago. However, it’s Europe and European unity that could be medium-term threats.
Interest Rates Near Neutral
Blackrock thinks that the US Federal Reserve is going to pause its quarterly pace of rate hikes amid slowing growth and inflation in 2019.
The US rates are getting closer to neutral, which is where the interest rate neither stimulates nor restricts growth. Blackrock thinks the neutral rate is around 3.5%.
Terry Simpson, Multi-Asset Investment Strategist from BlackRock Investment Institute said: “Now by our gauge, we do see financial conditions tighter, but they’re still relatively loose.”
Balancing Risk and Reward
Blackrock said that increasing uncertainty points to the need for quality assets in portfolios, but in a way that doesn’t undermine investors’ long-term goals. For example, Blackrock said it’s advocating for exposure to government bonds as a portfolio buffer.
Terry Simpson commented, “It’s about a barbell approach as we look into 2019 to mitigate some of the uncertainty that we think about for portfolios.”