Existing political and economic risks are pushing international investors into thinking about the security of their investment capital. Chasing big profits becomes secondary to this kind of security.
According to the CEO of CFS Management, 2018 was change they way we think and know about safe-haven assets. The thing is that last year, we saw trading wars while the Fed quit the quantitative easing program, which made investors withdraw their investors from emerging markets. That's why bond markets dropped considerably, even though they had been growing steadily over a couple of years in a row. At the same time, the indexes related to emerging markets lost 4-6% on average over the same period. The biggest amounts were lost by those who had invested in Argentinian and Turkish bonds. The Argentinian and Turkish CEMBI indicators plunged by 27% and 16% respectively. So, no wonder that investors ar now thinking about the ways to protect their investments from major this roller-coaster and possible unpleasant surprises in 2019. In particular, when thinking about the most promising assets to invest this year, we should consider the following factors:
- interest rate hikes
- the trade war between Washington and Beijing
- increasing political tensions in the EU and the situation around the Brexit
The consequences of the first 2 factors started to influence international markets last years. The 3rd factor definitely needs special attention. Leading international experts share the same opinion that European economies will face major difficulties caused by bloated sovereign debts and the ECB's tougher monetary policy. At the same time, the economic growth is weak, which only adds more fuel to the fire.
Italy is already facing major financial difficulties. For example, the local government will have to refinance its huge debt to the amount of 300 billion euros. However, given those internest rate hikes, refinancing huge debts becomes a real challenge. Following the domino logic, the Italian problem may spread over many other economies of the EU. As a result, European banks will get weaker. Some EU states may even face economic recession.
Investors Don't Anticipate Double-Digit Profits
Strange as it may seem, more and more retail investors learn to evaluate the big picture more or less objectively, including the assets to invest in, as well as the related risks, opportunities, and various factors influencing financial markets. That's why most of them do not expect double-digit profits anymore. They are mostly focused on preserving their capital in the first place, and making moderate profits on top of them in the second place. These days, they are mostly investing stocks, bonds, structured products, as well as residential and commerical property. On top of them they are seeking investment opportunities among small-scale businesses.
With that being said, the expert says that when devising an investment portfolio in 2019, we should tend to buy safe-haven assets like gold, dollar, assets, UK and Japanese stocks. UK stocks have already lost a bit of their value due to the Brexit issue, which means you can buy them at a discount. At the same time, Japanese companies have been actively working on improving their corporate management, which will result in benefits for investors.
Also, we can consider buying emerging stocks, even though these assets should be treated carefully, without too much exposure to them. The thing is that such assets have been pressed due to the Fed's tough money-and-credit policy. This year, the assets have a good chances to recover.
