DUBAI – Investors will need to weather more volatility in order to capture opportunities in 2019, according to the Year Ahead report from UBS, the world’s leading wealth manager. Global economic growth will decelerate next year to 3.6% from 3.8% in 2018, and company earnings will grow at a slower rate. However, a 2019 recession still looks unlikely, and the price of many financial assets has already

moved to reflect uncertain prospects.

UBS Global Wealth Management’s Chief Investment Office (CIO) enters the year with an overweight position in global equities. However, as the market cycle matures, investors should diversify and hedge their portfolios to guard against volatility as well as political and other risks. They should also take advantage of growth in fields like sustainable and impact investing, and pockets of value where financial asset pric

es are excessively low.

Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said: “Investors should retain positions in global equities but plan for market volatility. A slight slowdown in economic and earnings growth doesn’t mean no growth, and the recent sell-off has left a number of assets more attractively valued, but investors must also take into account the tense geopolitical environment as well as monetary policy tightening.”

Commenting specifically on the state of Middle Eastern economies, Ali Janoudi, Head of Wealth Management Central & Eastern Europe, Middle East & Africa, added: «While we expect structural reforms and higher oil prices to support economic growth in the Middle East, we continue to encourage local investors to embrace diversification strategies, particularly in the light of anticipated market volatility.” In its investment process, CIO seeks to test its ideas against professional investors’ views. Surveys of professional investors and wealthy US-based individuals reveal divergent outlooks for the year ahead.

• Close to half of professional investors see the US lagging global markets next year, while two-thirds of individual investors surveyed expect US stocks to match or beat global equities.

• Nearly half of the professionals surveyed anticipate the US dollar declining versus the euro, compared with less than one-sixth of individual investors.

• The most popular asset class for professional investors entering the new year is emerging market equities. For individual investors the top pick is US stocks. Professional investors are nevertheless more optimistic than individual investors on how much upside remains in the US equity bull market.

• Few professionals regard US political risk as a bigger threat than US-China trade tensions and higher interest rates. Individual investors are more concerned about US political risks than professionals are.

• When asked when the next recession will start, the most common answer among professional investors is 2021. Half of the individual investors surveyed expect the next recession to start within two years.

CIO recommends that investors should retain an overweight position in global equities as we enter 2019. Nevertheless, they should also hedge against volatility by holding overweight positions in medium-duration US government bonds and the Japanese yen, as well as focusing on quality companies and avoiding excessive credit risk. They should also look to neglected areas of the market, including value stocks in the US and emerging markets, energy equities globally, and shares of financial companies in the US and China. Sustainable and impact investing continues to provide longer-term growth opportunities, as do emerging market and Japanese stocks, and US dollar-denominated emerging market sovereign bonds. — SG