US companies’ earnings growth following the Q4 2018 sell-off could slow to the point of an ‘earnings recession’. But – outside energy and tech – the outlook may not be as bleak as it first appears.
With the structural direction of equities unclear, we prefer to be neutral in the medium to long term. We are structurally underweight in fixed income as we foresee gradually rising inflation and further monetary policy normalisation.
Tighter financial conditions, persistent political risk and slowing earnings growth are among the many factors set to inform fixed income choices, with careful security picking likely to matter more to performance than it did in 2018.
Fixed income quarterly outlook Q1 2019