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Investment outlook for March 2019

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Since the beginning of the year markets have been turbulent across the world with the US market remaining as the most stable one globally.

The political shocks along with trade conflicts have triggered a massive sell off on almost all of the world’s biggest financial markets and even though the tension has lowered, the volatility is unlikely to be gone as long as politicians will keep “throwing their toys around”.

Asian markets have been struggling due to the recession of the Chinese economy however with the trade agreement between the US and China in place, China is still projected to remain as a driver of the global growth among the emerging markets.

One of the most concerning aspects for the global economies is the availability of acquiring high debt levels due to low long-term interest rates instead of relying on the redistribution of income by introducing the progressive taxation. High debt levels could pose a threat of inability to respond to the economic shocks as well as slower long-term economic growth.

When it comes to the UK economy, the uncertainty that is related to the Brexit talks is making retail investors to pile the cash up. According to a number of researches, cash constitutes around 21% of the portfolios of the individuals that are invested in the UK markets since the collapse of the markets could potentially present an opportunity to buy in with a discount and would also allow to hedge against funds losing value in case if pound appreciates in value. It is believed that a soft Brexit would lead to pound gaining value, whereas a hard Brexit would make the national currency drop. In that respect, weakness of the Sterling makes the international companies with the dividends denominated in US dollars (e.g. HSBC, BP) appear favorable.

Generally, diversifications of the portfolio by geographic regions (to reduce exposure to the forex rate fluctuations) as well as increasing the share of the defensive assets within the portfolios are gaining relevance.

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