Swiss Wealth Protection
The expansive monetary policies of central banks have fuelled bull markets, and bull markets end not because their time is up, but because of impending recessions.
So, while many observers wonder when the next correction is coming, the real question is, what might trigger a crash?
We’re seeing little in the way of serious signs that the world economy is on the edge of a cliff. Yes, the US economy may have peaked, but there are no signs of any excesses or inordinate wage growth.
Inflation remains under control, corporate order intakes and profit growth remain positive, pressure on margins continues to be low, and stock buybacks and takeovers are on the rise.
With Congress now divided, we predict that the tax reform process will stall in 2019 and that there will be little in the way of new initiatives, leading to an easing of growth.
But while the US economy may lose a little momentum, it is possible that Europe will slowly pull out of its current lull.
There are plenty of potential crises in the offing – but how much of a risk do they pose?
The trade war between the US and China is a significant factor, and in Europe we have mainly political risks, such as Brexit, Italy and a potential leadership vacuum in Germany.
Regarding the latter, a change at the political helm to a reform-minded Friedrich Merz would provide fresh impetus. Largish market corrections may potentially originate in China, where the pace of growth is slowing and debt is rising.
In this late phase of the current economic upturn, defensive and value stocks offer the best growth potential.
Further corrections in the course of 2019 cannot be ruled out, but if you’re confident in the quality of your investments and have a long-term investment horizon, then you should have nothing to fear from market turmoil in 2019.