We started the year by giving a presentation on the key themes for 2019 at the Investor’s Forum conference in Prague.
Here is a short summary:
The Fed’s stance is already restrictive. We believe that one more rate hike is likely; two more are plausible; and an aggressive rate cut phase by 2020E is highly likely.
Trade negotiations: the upcoming talks with China are unlikely to yield the final breakthrough, but should result in minor concessions eventually. Trade tensions are likely to last for at least five more years, and eventually turn into a currency war.
EU politics: there is only one theme that matters, which is shared across the (still) 28 member states: voter discontent. Two big events to watch: Brexit (and eventual early elections in the UK) and the May EU parliamentary elections. Regardless of the May outcome, we believe that you can rest assured that Italy is not leaving the Eurozone any time soon.
An EU downturn should eventually show rising unemployment, by the summer time, in our view. No matter who becomes the next ECB president, the ECB will be cornered into more QE. This is the only big policy tool that EU politicians can agree on in the foreseeable future.
All our slides can be found here