2018 has been a challenging year for investors who have been confronted with increasing protectionism coming from the United States. The two biggest economies in the world have continued a tit for tat game of tariffs. This has affected global trade and confidence around the world. This article will look at the biggest stories for the coming year.
The issue of trade has not ended even after the truce between China and the United States. This truce is just a short-term thing that will likely not have major implications. This is simply because the two sides of the equation have hardline positions. China does not want to give up the IP theft and unfair trade practices that have made it the success it is today. The US will not accept a deal that leaves status quo. In addition, the Trump administration will likely continue putting pressure on the European Union.
Brexit is a major issue that investors will pay close attention to in 2019. This is because of the implications that the decision will have. An orderly Brexit will be a positive for the sterling and UK economies while a disorderly exit will have major bad results. The chart below provides a good summary of what we can expect in the coming year.
This year, the Fed has hiked four times and officials have continued to sound hawkish on the economy. This has led to increased criticism from Donald Trump who has accused the Fed of working against his agenda. In recent weeks, Fed speakers including the Fed chair have started talking about the neutral rate. In a recent speech, he said that the Fed was nearing the neutral rate in what was seen as a dovish statement. In the coming year, traders will pay closer attention to the actions of the Fed on interest rates.
European Central Bank
2018 was a difficult year for the European Union. The region saw slowed growth and other challenges like Italy and the United Kingdom. The ECB has pointed that it will wind down the asset purchases in December. It has also said that an interest rate hike will come ‘through summer’. Therefore, traders will pay close attention to the ECB for an indication of when it will start normalizing.
The Mueller probe on the Russian connection to the Trump campaign continued this year. Already, the probe has secured a number of guilty pleas and a conviction. There is a likelihood that the probe will wrap up this year. This is because Mueller will likely not want to work on it in an election year. The challenge for the president is that he does not control congress which increases the chances of an impeachment. However, this will not happen because Republicans control the senate. Still, it will greatly hinder the performance of the president because he will not be at a position of strength.
Crude oil has declined to the lowest levels of the year and the decision by OPEC has not helped. At the annual General meeting, OPEC members agreed to slightly reduce production. This was a dovish move for oil. As the US increases production, it will be a tough year for the crude oil.
Investors will pay a close attention to a number of key elections that will happen in 2019. The most important elections will be from the Democratic Republic of Congo, Hong Kong, Switzerland, and Canada.