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QMA’s portfolio managers see an extremely bumpy, but ultimately positive, road ahead for U.S. equities in 2019.

January 30, 2019

In terms of the depth of market declines, investors have definitely seen worse than 2018. However, in terms of the breadth of assets failing to deliver decent returns, 2018 was historic one.

In QMA’s 2019 Outlook & Review, QMA’s Ed Campbell and the global multi-asset solutions team take on the daunting task of peering 12 months into the future. Will 2019 bring a return to more placid and pleasant times, or are treacherous markets likely to remain as the calendar turns?

Unfortunately, the latter may be more likely given the underlying trend of slower economic and earnings growth, uncertainties related to Fed policy, trade tensions, and a variety of political and geopolitical risks. On the brighter side, markets have repriced this year to account for the greater uncertainty setting up an opportunity for better returns looking forward.

In the U.S., QMA believes strong consumer and business spending should at least put a floor under slowing growth. Growth in Europe should stabilize following 2018’s deceleration and will continue to be challenged by political uncertainty. Japan is likely due for another bumpy ride amid ongoing global trade tensions, slowing growth in China and the looming arrival of the October 2019 consumption tax. In emerging markets, stabilizing currencies, the recent fall in oil prices and a more dovish Fed (if that occurs) would cushion the slowdown. U.S. dollar-denominated debt loads remain an issue in certain countries, and China (as always) is a wild card.

Given the better valuation starting point and QMA’s view that a recession is still unlikely, returns for 2019 are expected to improve over those of 2018, however, volatility is expected to remain elevated so QMA’s overweight position in stocks and other risky assets is modest.

The key signposts to turn more bullish on risky assets would include a pause in the Fed’s tightening cycle, a weakening of the U.S. dollar, more decisive stimulus from China, signs of a bottom in global growth and evidence that earnings growth is hanging tough.

Read the full QMA 2019 Outlook & Review and find more 2019 views on

For a media interview with Ed Campbell to speak about market or economic conditions, please contact Judith Flynn.