Omnis market review

Omnis market review

21st December 2018

2018: The year that was

Volatility returned

  • Asset prices have risen and volatility has fallen since the 2008 financial crisis due to record low interest rates and plentiful liquidity provided by quantitative easing;
  • In 2018, these effects started to reverse;
  • Volatility came back as interest rates increased and quantitative easing turned into quantitative tightening;
  • However, it is worth remembering that volatility creates opportunities as prices adjust too far.

The post-crisis expansion continued

  • The period of economic expansion since the global financial crisis has been long but not steep;
  • Recoveries from previous recessions have been stronger but short-lived.

The recovery has been slow

The synchronised global expansion of 2017 ended

  • The US economy led, fuelled by US President Donald Trump’s ‘sugar rush’ policies which lowered taxes and resulted in the repatriation of foreign earnings;
  • Elsewhere in the world, growth slowed but remained at healthy levels. 

The US dollar recovered against other major currencies

  • Stronger economic growth, rising domestic interest rates and the flow of money from emerging markets (EMs) to the US supported the greenback.

Labour markets did not behave as expected

  • Tighter labour markets were meant to fuel inflation and boost inflationary prospects;
  • However, inflation has remained largely contained, and the yield curve has flattened instead of steepened as many predicted.

US markets went from overvalued to reasonably priced

  • We entered 2018 with the US market seemingly overvalued but we end the year with the US trading at its average long-term valuation following a fall in the 4th Quarter and due to good earnings numbers pulled valuations down to reasonable levels. 

Global forward PE ratio

Source: JPM Guide to the market

Emerging markets (EMs) struggled

  • We still believe EMs represent a promising long-term opportunity;
  • Developed nations are ageing and have consumed;
  • In contrast, many EMs have young populations which are keen to consume;
  • EMs should experience better long-term growth rates as a result, although the path could be uneven (as we have seen in 2018).


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This update reflects Omnis’ view at the time of writing and is subject to change.

The information is for informational purposes only and not investment advice. We recommend you discuss any investment decisions with your Openwork financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.