The wealth management firm says investors should make further gains but markets are nearing the later stages of a global growth cycle.

Investors should remain “constructive” but also “vigilant” about the state of markets and economies next year, as evidence grows that the world is in the later stages of the global upswing, according to RBC Wealth Management.

The Canada-based wealth management firm says that the investment skies have become “cloudier” due to some recent slowing of economic momentum, rising trade tensions and a more complicated political background in certain countries.

“While we are clearly in the late cycle, reliable leading indicators do not yet point to the risk of an imminent downturn, and 2019 global economic growth should still surpass that of the post-financial crisis average. We think this suggests earnings and share values have room to advance,” the firm said. It continued: “But 2019 equity returns could be modest and delivered unevenly. We believe it is appropriate to trim overall equity exposure to a market weight or benchmark level in global portfolios from a slight overweight level.”

This stance seems to chime somewhat with recent comments from the likes of Goldman Sachs, for example, who argued that the US economy – the world’s largest – should see a marked slowdown of growth in the second half of next year, with forces such as rising US interest rates taking a toll. The Organisation for Economic Co-operation and Development, the Paris-based club of industrialised nations, predicts that global gross domestic product is now expected to expand by 3.5 per cent in 2019, compared with the 3.7 per cent forecast in last May’s OECD outlook, and by 3.5 per cent in 2020.

On its theme that investors are in the late state of an expansion cycle, RBC Wealth Management said that it is time to cut risks in portfolios of debt assets. At present, investors get “minimal” compensation for taking risks in such assets, the wealth manager said.

Infrastructure
RBC Wealth Management said that infrastructure investment “offers the greatest near-term opportunity, in our opinion”.

“The global demand for new, refurbished, and replacement infrastructure assets is immense—particularly in the world’s two largest economies (the US and China)—and the private sector appears destined to play a greater role than ever before,” it continued. 

While the deterioration of US/China relations on trade is a worry, a more promising theme is the potential of technologies such as artificial intelligence. “Factoring its impact into investment decisions will become a `must have’ rather than a `nice to have’,” the wealth management firm added.