At the beginning of this year, many believed that it would be a year of simultaneous recovery of the global economy, the yield on 10-year treasuries would rise above 3.00–3.25%, the dollar exchange rate would decline, and the S & P 500 would end the year at 2850. The forecasts were partially realized, although the growth of global GDP remained close to last year's values. What to expect next year?
World economy
In its latest report, the IMF revised downward the estimate for the rise in world GDP in 2018 and 2019, from 3.9% to 3.7%. It is possible that this year will be the peak of the global economic cycle, after the passage of which a new period of deceleration is possible. Thus, the likelihood of a recession in the global economy next year increases. The actual growth rate of real global GDP may turn out to be much lower than the specified value, at the level of 2.0-2.5%.
Before the threat of a hard landing, in particular, is the economy of the Middle Kingdom, whose stock market index (Shanghai Composite) went into the negative zone this year, despite some easing of monetary and fiscal policy in the country. According to preliminary forecasts, in 2019, the growth rate of the country's GDP may slow down by 0.3%, to 6.3%.
It is expected that the unfavorable situation in the eurozone economy will remain, where political events in France, Spain, and Italy cast doubt on the stable existence of the monetary union in the foreseeable future. Due to weak statistical data, trade tensions in relations between the EU and the US, as well as the ECB's intentions to stimulate the region's economy as much as it needs, the euro risks being among the long-term currency outsiders.
As for the US economy, the effect of the fiscal stimulus program in 2019 is likely to fade away. By the middle of the year, the risk of a recession may increase substantially. Against this background, the Fed probably will not be able to continue tightening monetary policy. If the growth of the economy and interest rates in the United States is indeed approaching a turning point, the same applies to the American currency. It is assumed that discrepancies in monetary policy and economic growth rates will play against the dollar, and the lack of consensus in Congress on the eve of the presidential elections of 2020 may cause a risk premium when investing in dollar assets.
Developing markets
A less aggressive Fed policy may bring relief to developing countries that have increased their dollar borrowing in recent years. Resolving trade disputes between the United States and China would also help emerging markets after their worst performance since 2015. However, rising interest rates in the United States, strengthening the dollar, strengthening the trade confrontation between Beijing and Washington, a further fall in oil prices and the rise of populists to power in the two largest countries in Latin America - Mexico and Brazil - can deal a new blow to these markets.
Gold
In the event of a slowdown in the economic recovery in the United States in 2019, the precious metal will become the main beneficiary of the increased demand for defensive assets. Increasing volatility in the stock market, as well as Brexit and other political risks in various countries of the world, will also act as supporting factors for the value of gold. In addition, central banks will continue to buy precious metals in order to diversify their international reserves. It is assumed that all of the above factors will have a positive impact on the price of gold in the new year.
OilNext year, the balance in the market is likely to be achieved by increasing the demand for raw materials (mainly from China) and expanding the production of black gold in the United States. However, concerns about oversupply prevail, which has a strong negative impact on prices.
According to a number of analysts, as soon as OPEC + agreements to reduce oil production begin to be fulfilled, this will have a positive effect on quotations, which in the short term may rebound to $ 60 a barrel.
According to another point of view, further fall in prices can only slow down in speed, and the first stop will be near the mark of $ 45 per barrel, and then the level of $ 28 per barrel will follow.
Cryptocurrencies
Since the stock market has entered a "bearish" trend stage, virtual currencies have every chance of becoming the best-performing asset class next year.
Some experts believe that the year 2019 will be a period of "thaw" on the market and the use of digital currencies as a tool for integrating the blockchain into things that have already become familiar to us. It is assumed that people will rethink the value of this tool and will no longer see in it only a way of easy enrichment.
In addition, in the new year, an increase in the number of major players and the improvement of legislation in various countries is expected, which should have a positive impact on the inflow of institutional investors.
The material has been provided by InstaForex Company - www.instaforex.com