10 Charts To Watch In 2019

  

2. Manufacturing PMIs: down with DM, up with EM?It’s early days, but we’ve been seeing some stabilization in EM economic data (and softening across DM).Given the growing size and influence of EM economies this could be a key chart in determining how the previous chart plays out.

3. EM vs DM – Equities: this one also ties in closely with the previous chart, because this emergent economic divergence is among the many factors (including valuation) which I think will help EM equities comfortably outperform vs DM in coming years.

4. Global cyclicals vs defensives – a key theme in 2018 with rotation well underway.But the key one here (EM again!) is the red line and the nascent rebound: watch closely for follow-through.Since initially publishing this chart in the end of year report we've actually started to see the other regions begin to turn up too (...just like how EM rolled over first).

5. More and more global central banks are shifting into tightening mode.My guess is we’ll see more of the same here and more of monetary policy being a source (vs suppressor) of volatility.

6. One impact of monetary policy tightening is that cash becomes incrementally more attractive (as an income generating asset) beyond its core role of capital preservation. Look for cash allocations to rise from record lows (as indeed, they have already started to do so).

7. Higher cash rates may cause issues for those who opted to push risk for income: US high yield credit is in the final innings; anticipate wider spreads ahead.

8. In the wake of the global equity market correction it’s becoming easier and easier to find a bargain. Valuations have already reset to some of the previous major market lows.While global equities could get cheaper yet, the probability is increasingly in favor of long term investors at these levels.

9. Beset by numerous headwinds and cross-currents last year, commodities ended 2018 looking un-loved and undervalued. As with the previous chart, there’s always room to go lower, but as long as the global economy avoids recession and if China/EM do ultimately stabilize and improve the case for commodities starts to look very good.And it’s often that you see commodities tend to do well later in the cycle.As the window starts to close for US dollar strength, that could be the final element to fall into place for commodities (and EM).

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