TIME: Since the global financial crisis in 2008
Regions: Global
Volatility has been a constant since the global financial crisis and any hopes of stability have been dashed by geopolitical uncertainty. Global growth is predicted to slow with the IMF’s forecasts lowering predictions for 2020 over two consecutive quarters.
These risks have increased as the world order transforms. International agreements have faded in importance as unilateral actions based on raw political power, such as Donald Trump’s ‘America first’ policy, take centre stage. The lack of transparency around unilateral decisions by administrations has led to regular market surprises.
The threat of a full US-China trade war dominates concerns. But the fears about major economies slipping into recession, and renewed downward pressure on interest rates, are all contributing to nervousness in the financial markets. Add to this the simmering conflicts in the Middle East, unrest in Hong Kong and the worry that North Korea might cause significant regional disturbance, and certainty is hard to find.
Perhaps one of the few bright spots is the eurozone, which seems to have come through the worst. As Christine Lagarde becomes president of the European Central Bank, there is a cautious recovery in sentiment across the eurozone despite the likely headwinds from Brexit.
Safe havens are few and far between but, faced with greater volatility, advisers are going to come under pressure from clients to protect the value of assets and savings. It will not be easy.
Equity markets are vulnerable to this and a major risk to clients over the next 12 months. Yields on bonds will also be squeezed afresh if interest rates remain low or are cut again. This has brought a range of alternative assets into the spotlight. Inevitably, gold has enjoyed an uplift.
Diversification has also emerged as a theme for uncertain times among fund managers and advisers, which has brought options such as market-tracking ETFs into sharper focus, too.
