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It’s been an eventful 2018 for sure. Both sides of Korea made peace, the US decided to take their relationship with China to the next level by going into a trade war, and back home, mortgage rates have risen to levels I’ve not seen since I was in university (yes, that was some time ago).
But what everyone is really waiting for with bated breath is just what is going to happen in 2019. If the general 10-year cycle of economic slowdown is still something people think will happen then… we’re slightly overdue.
We decided to get some opinions from the experts to hear what they had to say about the road ahead. Here are some key questions and answers from IG’s market analyst, Jingyi Pan on the outlook for 2019:
1. Why is the market slowing down now?
Really the question on everyone’s mind and definitely a difficult one to pinpoint exactly, Jingyi said, “The congregation of expectations for both a global economic and corporate earnings slowdown, coupled with the fears of trade tension implications altogether can be seen weighing on markets going into 2019.”
Needless to say, the markets have certainly taken a cautious approach this entire year, but as fears of trade tensions started to escalate in the second half of the year, it only got worse. But more on that later.
2. What is the outlook on interest rates and the Fed’s position given the economic slowdown, and how will this impact Singaporeans?
According to Jingyi, “The market is currently pricing in less than the Fed’s two hikes expectation for 2019 at 25 basis points each. The onslaught of uncertainties does provide little visibility to 2019’s outlook which has induced even the Fed to stay cautious.
That said, the perception remains from the latest December meeting that the Fed would continue tightening, which would nevertheless mean that the higher interest rates environment would continue for Singaporeans, much like the case currently.”
Like we mentioned, we’re already seeing a spike in home loan interest rates in Singapore, and we’re not sure how much higher that’s going to go. On the US side, the increase of interest rates from the Fed to date have seen some desired results, but the overall sentiment is that there will still be a couple of rate hikes.
3. Why should Singaporeans pay attention to the trade war happening now?
“A further escalation on the tariffs end is bound to hurt growth for Asia’s anchor, China. The trickle-down effect on our trade dependent economy would be of concern.”, said Jingyi.
Just for some context as to the impact the trade war has had on China alone, check out this article on how the richest woman in China ended up becoming the biggest loser by percentage as a result of trade tariffs and the resultant fear.
4. How can the average investor use a technique like Position Sizing to better manage their portfolio?
Simply put, position sizing refers to the amount of a money an investor is going to trade as part of their portfolio i.e. the size of their position. In order to do this, you first have to assess your account risk, which many typically set at 2%. This then allows you to determine the maximum you will spend per trade and, subsequently, how many lots you can purchase.
This simple technique allows investors to control risk while maximising returns.
5. How can investors shape their mindsets to cope with the economic downturn and benefit from their trades?
This has to certainly be the most important element of trading within the context of an economic downturn, because it’s not uncommon for investors to panic buy/sell when they realise they are facing serious losses.
Understanding your own trading psychology is the first step towards ensuring that you approach this period of market downturn with the right frame of mind.
What more can you do?
Understanding the rhythms and strategies related to trading in a market slowdown aren’t simple, and there is definitely a large part of this that is psychological in nature.
IG is holding a free seminar on 19 Jan 2019 from 9.30am to 12.30pm to address all these issues above and more. Some of the key highlights of the seminar are:
- Macro economy outlook on trade war and interest rates
- Going into 2019, which markets will be most affected?
- What are some of the variables to keep tab on during market slowdown?
- What’s new for cryptocurrencies?
- Debunking the myth: Long-term market direction is always up
- Using various types of stops (including Guaranteed Stops) when trading in both directions
- Trading psychology: Mindset you need to have to be a successful trader
- How do we eliminate bad trading habits?
- Techniques we should master to be better traders
Understanding these various points will give you a much better perspective on making investment decisions into the year ahead, instead of heading right into a snowstorm blind.
Interested in hearing more? You can sign up here.
What else are you expecting in the upcoming year? What are your thoughts on investing in 2019? Share your thoughts with us here!
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