Article by Liam Dann, originally published in the NZ Herald
The summer break has seen global markets rebound sharply from their pre-Christmas slump making the life more difficult than ever for investors hoping to see a long term trend emerge in 2019.
That hasn't stopped Pie Funds chief executive Mike Taylor making some big calls for the year ahead.
Ultimately these kind of predictions are best viewed as a chance to collate your thoughts for the year ahead and shouldn't be treated as gospel.
On the MarketWatch video show this month Taylor also quotes one of the world's leading investors Ray Dalio: "If you spend to much time looking at crystal balls you'll end up picking up broken glass."
But to get you thinking here are his eight predictions for the year ahead:
- Markets will not hit fresh lows (unless the US enters a recession in 2019)
Taylor says he's had to put a caveat on that one because history shows markets would take a big tumble if recession fears were realised.
But if the economy stays steady he expects markets to stay clear of the low hit in December.
- If China/US trade issue is resolved and Fed stays on hold markets could hit new highs
Taylor also sees a good chance markets will actually hit new highs this year particularly if the US Federal Reserve remains cautious on the pace of rate hikes and if a resolution is found to the big trade stand-off.
- Emerging markets to outperform developed markets
In simple terms emerging markets are starting from a much lower (or cheaper base) having been hit harder last year so have more room on the upside, Taylor says.
Expect to see some big stimulus released to pump China's struggling markets.
- No rate hike in New Zealand or Australia in 2019
Slowing property markets and moderate economic growth on both sides of the Tasman will keep rates in both countries on hold.
- Trump will get the money for his wall
"We've seen the mentality of President Trump," Taylor says. "And he appears to have his toes dug in"
- Oil to rebound on cuts to supply
The oil rebound began late last year and is set to continue in 2019 as major producers look to cut supply. "The oil market is much more about supply than demand," Taylor says.
- Market to sell off again in March
As much as Taylor remains optimistic about markets he sees potential for the latest rally to "run out of puff" and is picking another sell-off in March.
- Yield curve to invert in the US
Whether or not we see a US recession in 2019 is far from certain but Taylor does expect to see one of the biggest indicators of recession emerge. When the rates on short term bonds go higher than the long term rates it is described as an inversion and seen as a predictor of recession. "The longer term rates - because of people's fear about the economy - won't go much higher and if the Fed does hike rates twice this year we could see an inversion."