Investors are advised to look away from US equities as value has shifted to other regions and sectors in the second-half of the year, State Street Global Advisors said on Wednesday.
US equities have been on a bull run for over a decade due to an easy money policy by most central banks, with the main index gaining nearly 200 per cent since 2008.
The country to watch out for among emerging markets would be China.
“China matters most among emerging markets for global investors in 2019,” said Rick Lacaille, State Street’s global chief investment officer (CIO).
“Not only is it an important driver of global growth, it is also increasingly important to global markets as major emerging market equity and debt indices begin to include onshore Chinese securities. Moreover, markets are only beginning to digest what a fundamental shift in relations between the US and China might mean for future growth.”
In the first half, US stocks may still benefit from the last vestiges of the US Federal Reserve’s fiscal stimulus and strong consumer spending.
Geopolitical risks in Europe look set to weigh on stocks, especially in the UK as its departure date from the European Union (EU) draws closer.
Political concerns will likely affect the euro and sterling amid EU budget disputes with Italy and continued Brexit uncertainty.
“Given we expect higher volatility in 2019, investors may want to increase their dry powder,” Lori Heinel, deputy global CIO at State Street, said.
“While the current cycle isn’t over until it’s over, building in strong defences now should help navigate late-cycle volatility and uncertainty in the months to come.”