Evolving Markets

Emerging markets (EM) slid from February through the year-end on the back of a stronger dollar, an escalating trade war and notably weaker growth in China. However, we see evidence that these previous headwinds may now be turning into tailwinds.

The return of negative bond/equity correlations was a rare silver lining for multi-asset investors in 2018.

The MSCI AC Asia ex Japan (AxJ) Index fell by 2.6% in USD terms in December, as concerns about slowing global growth, tightening monetary policy and rising geopolitical tensions continued to drive sentiment.

The S&P/ASX 200 Accumulation Index returned -0.1% during December.

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 1.50% over the month, outperforming Australian equities which fell 0.12%.

While New Zealand markets have had a rather interesting and more volatile time, the main drivers of the economy remain sound.

As we wrap up the final weeks of 2018 and look ahead to whatever challenges lay ahead next year, we can’t help but reflect on what has been a testing and frustrating year for investors.

US Treasuries (USTs) registered gains in November, while yields fell along with faltering US equities.

While it is true that the Fed will be criticized no matter what it does tomorrow, it could limit criticism to mild levels if it hikes only 10 bps.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Today’s release of the 3Q CY18 data on aggregate Japanese corporate profits showed interesting trends regarding our long-term theme about improving corporate governance.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

The macroeconomic backdrop for Asian countries should remain broadly neutral for credit performance in 2019. GDP growth is expected to moderate across the key economies, although we don’t expect any hard landing scenarios to materialize.

In addition, we have to consider the eventuality of a prolonged trade war. But China would be able to mitigate its impact initially via a combination of monetary and fiscal stimulus, helping offset the impact of tariffs to a certain extent.

Credit markets didn’t perform in line with the expectations we set at the beginning of the year and disappointed most investors.

The potential hangover from the monetary binge of QE continues to weigh on global equity markets as we head towards 2019. The turning of the calendar will do little to change this.

As we reflect on 2018, we would all agree that Trump and his trade policies dominated the conversations and dictated some of the major moves in the financial markets around the world.

We believe 2019 will be an important year for active selection or alpha and our focus will be on delivering on stock selection returns by picking quality companies who are resilient in growth amid a rising risk environment.

So many developments have occurred since we last met in September, but the major ones were the surprising collapse in oil prices mostly due to geopolitical factors, the U.S.-China trade and BREXIT conflicts becoming increasingly intractable, and that aspects of the global economy showed occasional signs of moderation.

The MSCI AC Asia ex Japan (AxJ) Index gained 5.3% in USD terms in November, despite persistent concerns over global growth and a slide in technology stocks.

The S&P/ASX 200 Accumulation Index returned -2.2% during November.

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 0.24% over the month, outperforming Australian equities which fell over 2%.