Wealth Management: Market Perspective – We get there when we get there (English only)

Kevin Gardiner, Global Investment Strategist, Wealth Management

The media - and much of our industry - sees economics and finance as drama. Urgency, imperatives and sensation abound.

We anxiously await imminent recessions, market crashes and renewed emergency cuts in interest rates. We hear Italy's debt is unsustainable, and that the euro is doomed. We are told the Trump presidency and Brexit must end in economic disaster. Amid the drama, wealth management is presented as an urgent, relentless hunt for returns, encapsulated in a unique, 'optimal' portfolio.

The reality is less exciting. Most of the time workers and businesses are steadily getting better at what they do by producing more stuff, more productively. In practice, investing is more of a marathon than a sprint, and there are many perfectly acceptable portfolios. A little patience can help. Thus it still seems to us as if the next US recession and/or financial crisis may be some way off - higher interest rates, bond yields and oil prices notwithstanding.

Italy's renewed profligacy looks underwhelming. The trade tussle is becoming more focused along the US-China axis, but we can imagine positive as well as negative outcomes. A UK-EU deal is still feasible - as is a longer transition.

Sensation-hungry pundits will be right again one day (and by then we may even agree with them). Volatility has stayed remarkably low this year, and a rebound to more 'normal' levels remains overdue (as we have said many times). We can see more testing times ahead as US profit growth slows sharply in 2019 while the Federal Reserve continues to normalise interest rates.

But economies and markets do not always collide and crash. If we invest as if they do, our portfolios may well be more resilient when the bad stuff eventually arrives - but they may be smaller too.

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