Slowing economic growth, shrinking central bank balance sheets and continued bouts of volatility will help make 2019 another poor year for risk-adjusted investment returns, with few obvious havens, according to Goldman Sachs Group Inc.
“Expect better but still low returns in 2019” for multi-asset global allocation portfolios, Goldman strategists including Christian Mueller-Glissmann wrote in a note Monday.
While the decline in valuations across asset classes has improved the medium-term outlook, “we see a weaker expected macro backdrop in 2019 as likely to limit return potential,” they wrote.
The gloomy outlook matches the experience of what’s been a rough year for financial markets.
Investors have been rattled by everything from monetary policy normalization to tariff threats to global trade, a slowdown in China and the prospect that corporate-earnings growth has peaked. In what some have called a regime change, bonds have also been poor hedges for equities, upending the classic 60-40 portfolio strategy.
For their part, the Goldman strategists still advise an overweight allocation to stocks with the S&P 500 posting positive returns this year, but recommend a bigger holding of cash than benchmarks suggest and have an underweight call on bonds. The team downgraded credit to underweight last week.