North America  

Predictions for worst and best performing assets

Predictions for worst and best performing assets

Financial advisers expect US equities to be the best performing asset class of 2019, with bonds struggling.

Aegon spoke to 200 advisers in August and 22 per cent expressed the view that US equities would top performance charts next year.

A total of 15 per cent of advisers polled expect emerging market equities to perform best in 2019 and 14 per cent anticipated a strong year for UK equities.

The sentiment expressed by the advisers polled by Aegon was backed up by recent data from the Investments Association, with found the IA North America equity sector was the most popular in terms of inflows, attracting £116m in October.

But Brian Dennehy, who runs the Dennehy Weller advice firm in Kent, said he expects the US market to perform less well in 2019, as the economy has been boosted by a “sugar rush” of tax cuts, and the effect of those will wear off in the new year, creating far more mediocre returns.

Advisers surveyed by Aegon had a cautious view on cash and bonds, with 24 per cent of advisers expecting cash to be the worst performing asset class, followed by gilts, which 19 per cent of intermediaries expect to deliver the poorest returns.

Corporate bonds were expect to be the worst performer of 2019 by 8 per cent of advisers.

That backs up the data from the Investment Association, which showed that £1.6bn was withdrawn from bond funds in October.

Bonds can act as a safe haven but also can be expected to perform poorly when inflation is rising.

Nick Dixon, investment director at Aegon, said: "In this highly volatile investment landscape, advisers are right to question whether the longest bull market in history could be coming to an end.

"When it comes to investment decisions, advisers and investors are having to face a number of concerns head on.

"This includes the impact of geopolitical stress on emerging markets, equity valuations, and potential impact of Brexit on UK equities. However, our research shows that advisers remain level-headed in the face of a very fickle market.

"Advisers are right to remain focused on long-term returns, diversification and avoid reacting to fast moving market conditions."

David Scott, an adviser at Andrews Gywnne in Leeds, said he expects a significant stock market crash before the end of US president Donald Trump's term as president in 2020, as higher US interest rates bring to an end what he calls the "everything bubble" that he believes has pushed the valuations of most equity markets higher in recent years.   

david.thorpe@ft.com