Terence Moll is a chief strategist at Seven Investment Management and a well respected voice in financial circles.
In an Article he wrote recently in New Model Adviser, he muses over why investors should not be worried? He thinks fears are exaggerated – and they actually have plenty to be cheerful about. Here are five things he says investors should not fear this year.
A US recession
The big question for global growth is the US. It is the developed world’s growth engine at the moment, and US recessions have often been associated with equity crashes in the past.
Although some commentators fear a recession in 2019, he is not overly worried.
The US is currently growing at around 2.5%. From these levels, it normally takes at least two years for growth to turn negative.
Moreover, the usual imbalances associated with recession – soaring inflation, a housing crunch or a commodity price shock – are largely absent. He thinks a US recession is unlikely before late 2020, at the earliest.
So far, tariffs have been implemented on around 2.5% of world imports, corresponding to less than 0.6% of world output. They are certainly a negative for growth, but on a tiny scale to date.
Although they could get much worse, the US and China will reach a compromise that will not harm their economies (and their people) too much.
Brexit is a shambles and investors are worried the UK could end up exiting with no deal in place, which would be a really terrible deal, in March.
But it is in the interests of both the UK and the EU to reach a broadly sensible outcome. He thinks a deal that is not too painful for the UK will materialise.
A Corbyn government
Jeremy Corbyn’s bark is worse than his bite. If he came to power he would be so constrained by the range of views within his Labour party, and by business pressures and economic restraints, he would not be able to do much that would derail the UK’s financial market.
Markets are volatile. They move up and down. Whenever markets fall, commentators concoct stories to explain why they have fallen – stories that are often alarming and are frequently complete inventions, with no basis in fact. It is best to ignore the headlines.
Markets were exceptionally quiet in 2017. Volatility returned to more normal levels in 2018, and he expects more of the same in 2019. He says this is not something investors should worry about because it is simply how the financial world works.