What are the major themes emerging? Firstly, the theme of the China / US trade war has gone from irritant to full blown concern. Those with longer memories are thinking about the trade war in rather similar terms to World War 1: trench warfare where both sides battle it out on the Western Front with countless casualties and absolutely zero territory gain. Naturally, there will be winners and losers, predict the economists. Well, if Spy recalls his dusty military history correctly, in WW1, it was the “behind the line generals” who seemed to “win” and the poor suckers on the front line who bore the brunt of their madness. Spy strongly suspects a similar outcome if this idiotic path continues, as do many of the managers and bankers Spy has been hearing from. One consequence of this, will be China engaging with Europe, Africa and Asia like never before.
The second theme is volatility. More volatile than a crypto currency. More volatile than a film director with a raging ego. More volatile than chloromethane. Take your pick of a suitable metaphor. Regardless, the experts have been lining up one after another to tell Spy to expect more jumpiness around. In what, asks Spy? And the answers come booming back…“In everything.” It appears nobody is expecting a reprieve for equities, fixed income or property. Indeed, Hong Kong property is in for a bit of a roller coaster if several large banks are correct. Therefore, hold on to your hats, 2019 is going to be a bumpy ride. Still, that very volatility should provide some healthy trading opportunities and it is trading opportunities that give reasons to talk to clients and talking to clients gets them to invest. Therefore, a dose of volatility is surely not all bad?
The third major theme emerging, which will no doubt come as a surprise to many, is the importance of ESG. Spy can hear the tut-tutting already. Those who doubt Asia’s retail commitment in this area will probably have a touch of incredulity. Not so fast, muses Spy. Governance is going to be in the spotlight. Governance at companies is going to be scrutinised more closely than before. While Mr Carlos Ghosn languishes in a Tokyo penitentiary, his fall from grace is prompting risk analysts everywhere to bring out their Sceptical Magnifying Glasses (SMGs) and subject every investment idea under to a more rigorous examination. Banks will be looking for funds and investments with stronger risk frameworks. The yogurt-munching, muesli-crunching do-gooders of the world may be disappointed it is not the E or S of ESG in the spotlight, however, we have to start somewhere. So, give us a G!
What has Spy learned in this whirlwind of market outlooks and crystal ball gazing? Well, not a lot. Seldom has the investment community been hedging its bets more. The lack of conviction is rather palpable. The lack of strong ideas is evident everywhere. And, yet, it is this rather wishy-washy set of viewpoints that encourages Spy most. For when conviction is highest, markets tend to disappoint. Let markets climb their wall of worry in 2019 and quietly outperform rather than start with a booming fanfare that fizzles out in a whimper of disappointment.
Spy, for one, predicts more sampling of Bordeaux wines, an end to the gin boom and brandy to have a little, well-deserved renaissance. As for markets, he is leaving that to 2019. Cheers!
Until next week…
P.S. Spy’s colleagues seem to have joined the year-end flurry with some manic activity. Half of them appear to be making content much cleverer this week and the other half appear to be preparing for FSA’s fund awards, diligently examining top performing lists and sparring with judges. No peace for the wicked.