With numerous uncertainties present in the global economy, market participants may be looking for meaningful signals about what’s to come in 2019. In our semiannual assessment on the state of the markets, Janus Henderson’s investment teams weigh in on the themes that could dominate in the months ahead and the potential impact for investors.
Explore our Insights by Asset Class
At Janus Henderson, we use our detailed fundamental research and deep understanding of companies and sectors to drive investment decisions. Although we avoid far-reaching macroeconomic calls, we think it is important to consider near-term signals. To that end, Market GPS 2019 explores what our investment teams are seeing from the ground up and where we are identifying the most compelling opportunities across asset classes. While many variants are likely to set the direction of markets in the new year, we highlight four key themes to watch:
The pace of change is greater than ever before. Disruption is being felt across industries and geographies and is proving a differentiator in the long-term performance of investors’ portfolios. There are exciting opportunities, but also significant risks for the “disrupted.” We believe health care and technology are among the key sectors to focus on when considering disruption.
We expect returns among asset classes, currencies, countries and sectors to continue to diverge, driven by myriad factors: the fading of central bank synchronization as few regions follow the U.S. pace of tightening; typical late-cycle behavior leading to more volatility and idiosyncratic risk; and fundamentals once again determining asset prices. We believe active management is the best way to confront these challenges.
Trade disputes and the subsequent reactions, the outcome of Brexit and developments in Italy all have the capacity to significantly reroute markets. These known unknowns will no doubt be accompanied by challenges not yet on the radar. We believe these conditions require investors to be nimble and flexible as they seek to capitalize on potential opportunities and to navigate the potential fallouts.
It will remain important to balance the benefits of the strong underlying investment drivers of emerging market growth with the likely ongoing elevated levels of volatility and dispersions of returns. We believe that this will make it imperative to know what you own, be confident in management and follow bottom-up analysis and compelling themes rather than following the index.
Sticking with Quality in Small Caps
Portfolio Manager Jonathan Coleman says uncertainties are mounting about the strength of the global economy in 2019, making it all the more important for small-cap investors to look for companies with sound management teams, low debt levels and other high-quality traits.
Navigating Market Volatility
Rising interest rates and global trade tensions could lead to increased market volatility in 2019, says Portfolio Manager Brian Demain, making a disciplined investment process focused on high-quality growth all the more important.
Staying Focused on Secular Growth
As interest rates and inflation pressures climb, Portfolio Manager Doug Rao says it is becoming all the more important to focus on companies with secular tailwinds, pricing power and competitive advantages.
Volatility Creates Attractive Entry Points in Advantaged Companies
George Maris, Co-Head of Equities – Americas, discusses how the pace of inflation could shape the economic landscape and markets in 2019 and why investors must exercise prudent security selection as volatility climbs to historical levels.
Focus on Predictable Long-Term Trends
Ian Warmerdam, Head of the Edinburgh-based Global Equities Team, believes that in 2019 and beyond investors should focus on companies with fundamental resilience and that are operating in end markets with long-term secular growth.
Inflation Pressures on the Rise
Although trade tensions have made headlines, Portfolio Manager Carmel Wellso argues an uptick in inflation and rising interest rates could have the biggest impact on the global economy in 2019, potentially leading to more volatility in equity markets.
Mitigating Risk as Cracks in the Credit Cycle Emerge
Head of Fundamental Fixed Income Darrell Watters highlights the importance of mitigating downside risk as the credit cycle continues to progress in 2019.
Real Rates Set to Rise, But at What Pace?
Head of Global Asset Allocation Ashwin Alankar considers rising real interest rates to be a key theme for markets and the economy in 2019 as the Fed’s normalization program possibly reaches its final stretch.
Low Liquidity Casts Shadow over Volatile Markets
John Fujiwara, Portfolio Manager on the, Diversified Alternatives team, explains why the combination of inflation and illiquidity could upset markets in 2019 and why many high-beta strategies may be at risk in markets where higher volatility and lower correlations are the norm.