BlackRock highlighted three key events it thinks are important for markets this quarter in a recent commentary from global chief investment strategist Richard Turnill.
According to Turnill, uncertainty around key events is likely to stoke volatility, arguing for greater portfolio resilience in 2019.
“We prefer a barbell approach: exposures to government debt as a portfolio buffer on one side and allocations to assets offering attractive risk/return prospects such as quality and [emerging market] stocks on the other.”
Here are the three key events to watch in the first quarter:
Jan. 29-30: FOMC Meeting
The Federal Open Market Committee’s Jan. 29-30 meeting will be a key event in the first quarter, as the U.S. economy nears late cycle and financial conditions tighten, according to Turnill.
“Both Fed policymakers and the markets will be laser-focused on economic data for clues about the health of the global economy,” he writes.
Turnill expects the Fed to become more cautious as U.S. interest rates approach neutral — the level at which monetary policy neither stimulates nor restricts growth.
According to Turnill, the Fed reiterated its tightening bias in December, citing a still robust growth backdrop.
The policymakers’ median rate expectations for 2019 dropped to two hikes from three, which is in line with Blackrock’s base case.
Turnill thinks the January meeting could provide clues to the Fed’s future path.
“We see a pause in March looking increasingly likely, as the Fed weighs the impact of tightening financial conditions and economic fundamentals,” he writes.