Looking Ahead

Part of Blackrock's view of the upcoming 4th quarter:  Go read the whole thing here.

Geopolitics have come to the fore as a major driver of markets and the global economy, just one of the investing themes for 2019 we discuss in our Q4 Global investment outlook. Here are five forward-looking takeaways from the piece.

1. Trade disputes and geopolitical frictions have become key drivers of the economy and markets. U.S. trade policy is increasingly unpredictable. Recent geopolitical volatility – including attacks on Saudi oil infrastructure–underscores this message.

1. Persistent uncertainty from protectionist policies is denting corporate confidence and slowing business spending. Yet we still believe the economic expansion is intact, supported by dovish central banks and a robust U.S. consumer. This suggests moderate risk-taking will likely be rewarded – even as recent events reinforce our call for a greater focus on portfolio resilience.

1. We expect more Federal Reserve rate cuts, but believe markets are pricing in too much monetary easing. The European Central Bank materially exceeded market expectations on stimulus, launching a broad package with a combined impact that should be greater than the sum of its parts.

1. We do not believe monetary policy alone is a cure for the fallout from global trade tensions. Supply chain disruptions could deliver a hit to productive capacity that fosters mildly higher inflation even as growth slows. This complicates the case for further policy easing.

1. Overall, we favor reducing risk amid the ongoing protectionist push. We prefer U.S. equities for their reasonable valuations and relatively high quality; and the min vol and quality factors for their defensive properties. We like EM debt for its coupon income. We are overweight euro area sovereigns: a relatively steeper yield curve brightens their appeal even at low yields. And we see government bonds as important portfolio stabilizers.

Blackrock is one of the world's largest asset managers with trillions of dollars under management, mostly through their ETF division iShares.  Thus, their opinions are worth listening to.  Not sure what I think about their position on government bonds for individuals but everybody is allowed their own opinions.   

As I said last week, I'm dealing with a bit of a family issue.  Nothing very serious thank God but it is something that may force me to keep a more erratic schedule with this blog.  I will try to post Wednesday and Friday this week but hope all understand if I can't keep to that schedule.