Equities were chosen to be the best global asset class this year, followed by emerging-market credit and cash, according to a survey of attendees at a Goldman Sachs Group Inc. conference last week in Hong Kong.
Stocks were the top pick by 33 per cent of the respondents, while 25 per cent said the best performer would be emerging-market credit, Goldman said in a report on January 25. Cash was picked by 14 per cent, developed-market government bonds by 13 per cent, commodities by 10 per cent and developed-market corporate bonds by 5 per cent of people.
“Investors think China/US trade tensions may ease, if not remain unchanged in current position,” Goldman strategists including Timothy Moe wrote in the report, citing the survey results.
“Politics and trade friction are considered to be the biggest risks to equities, followed by economic recession.”
The survey comes after a year in which uncertainty about everything from the Federal Reserve’s rate trajectory to global trade policy to economic growth and corporate earnings has risen. The MSCI All-Country World Index fell 11 per cent in 2018, its worst performance since 2008, and other asset classes struggled mightily as well.
Global equity returns as measured by the MSCI ACWI were seen by half of respondents in the 5 per cent to 10 per cent range this year. About 12 per cent expected better performance than that, while 38 per cent foresee the gauge ending 2019 flat or down. With the gauge ending 2019 flat or down. With the gauge already up 6.3 per cent less than a month into 2019, that would indicate a relatively flat performance for the rest of the year.
In terms of regions, 53 per cent believe Asia ex-Japan will perform the best, with the US ranked best by 21 per cent.
By industry group, technology led the pack with 32 per cent, while consumer stocks got 21 per cent of votes. The survey found some division with a question on which central bank will surprise the most.
The Federal Reserve garnered more than half the votes, with 30 per cent saying it would be more dovish than expected, and 22 per cent saying it would be more hawkish.
The People’s Bank of China being surprisingly dovish was picked by 18 per cent, while 16 per cent said it would be the European Central Bank being more dovish than thought. That’s on top of a split in how many times respondents think the Fed will hike this year. Around 41 per cent said it would be once, 29 per cent said twice and 20 per cent said the central bank would remain on hold this year.