Market update - April 2019

A summary of our current economic and market views


Rebound in markets but economic growth is slowing

We have seen a healthy rebound in equity markets over the first quarter of 2019, with global equities up 10%. Equity market valuations are no longer cheap and are trading in-line with long-term averages. We are seeing signs that global economic growth is slowing and are forecasting a moderation this year to 2.8%, from 3.2% in 2018. However, we do not expect a recession this year or next and there are reasons for cautious optimism. Signs that the US and China are moving closer to a trade deal is positive for risk assets. In addition, the Federal Reserve and European Central Bank have both pulled back from plans to increase interest rates this year. This should provide support to both equity and bond prices.

Downgrading expectations

Slower global growth and trade concerns have resulted in downgrades to earnings growth forecasts for 2019. Companies in the MSCI World index are now expected to post profit growth of a modest 5% this year. While investors would not welcome further downgrades, lower expectations reduce the risk of earnings disappointments later in the year. Data on market sentiment similarly suggests that investors are in cautious mood. Closer to home, Brexit related worries have led to UK growth downgrades, with ongoing uncertainty weighing on sentiment.

Portfolio implications

We retain our exposure to global equities to benefit from continued earnings growth, although are becoming more cautious at the margins, taking profits where appropriate. We expect a return of market volatility, which may provide opportunities for long-term investors. While we remain underweight bonds overall, our view on the asset class is becoming less negative as rate expectations are peaking. We continue to like alternative investments for their diversifying characteristics and commercial property which continues to generate an attractive income relative to bonds.


The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Limited 12 Moorgate, London, EC2R 6DA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

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