A trade war between the US and China will have the biggest impact on client portfolios this year, Octopus Investments’ Oliver Wallin has said.
Speaking to FTAdviser, Mr Wallin, investment director for the multi-manager team at Octopus Investments, predicted 2019 will see a re-run of the key macro themes that dominated 2018, including slowing global growth, central bank monetary policy, US President Donald Trump, European politics and Brexit.
But the biggest impact on portfolios will stem from the US-China trade dispute, he said.
He explained: "Concerns about that escalating to a trade war certainly weighed heavy on investor sentiment over last year.
"Should that be resolved amicably – and initial signs are encouraging – markets will generally breathe a big sigh of relief, and prospects for global growth will certainly pick up.
"Conversely, if it escalates any further, that is going to be a negative for markets."
The other pressing issue will stem from the US Federal Reserve, and whether its actions align with market expectations.
He said: "The market thinks there is going to be anything from zero to two rate rises next year - anything more than that, fears of policy error start to escalate."
For these reasons, he warned investors and advisers will need to be "truly diversified", suggesting "those employing diversification and active fund management will be rewarded".
He explained further that as traditional assets, such as equities and bonds, become more closely correlated, investors should look to diversify their portfolios away from these asset classes.
Mr Wallin added: "Now for us, we look at alternatives, such as venture capital trusts (VCTs), peer-to-peer lending, absolute funds, that should all be in play, and you do need to create diversification within that asset group.
"Advisers and their clients could consider approaching this asset class with a multi-manager approach or blending a selection of different groups."
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