Originally published to CNN Business | December 9, 2018
Twelve months ago, investors were giddy.Markets were buoyant, supported by synchronous global growth and market-friendly US policies, including freshly minted corporate tax cuts and deregulation.What a difference a year makes. As 2018 draws to a close, investors are unsettled, volatility is spiking and most portfolios are in the red. Large setbacks in global equity and emerging markets, coupled with lackluster performance from bonds, credit and most hedge funds, have left investors unhappy this holiday season.
In 2019, the market environment is likely to remain challenging as growth slows and returns on capital struggle to meet still-lofty expectations.
Households, on the other hand, may fare somewhat better, as their share of the pie grows, courtesy of moderate wage increases. But even so, those gains are likely to be incremental and gradual. Global economic fundamentals explain why.
At first glance, the world economy looks to be in pretty good shape. Not since the 1980s have as many advanced and emerging economies enjoyed a simultaneous expansion like the one now underway. Today, those countries in recession or worse are few in number and small as a percentage of world output (e.g., Venezuela or Argentina).