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2018 proved to be a challenging year for equity markets, with the US being the one major market which made strides. British investors enjoyed yet another boost from currency effects between the Pound and the Dollar as well. UK and European markets have been under a Brexit cloud, while the details of the deal and political wrangling continue.

Our Investment Committee expect 2019 to throw up further challenges both economic as interest rates and inflation rise, political issues unfold as the Brexit deadline nears. Trade talks and tariffs continue to play out between China and the US. UBS estimate that global economic growth will decelerate next year to 3.6% from 3.8% in 2018, and company earnings will grow at a slower rate. However, they believe a 2019 recession still looks unlikely, and that the price of many equities have already adjusted to reflect uncertainty.

Bond markets were also more volatile in 2018 because interest rates and inflation increased. If economic conditions decline some companies could default on their interest payments on bonds or could find it hard to refinance at higher interest rates if their bonds mature. We continue to focus on funds which predominantly invest in bonds with decent credit ratings.

Economic data from the US will be a key factor for both equities and bonds in 2019, with markets likely to react to any perception that economic growth is slowing. We will keep an eye on these figures and discuss economic data, market valuations and market performance at our monthly strategy meetings. There are still opportunities in both equities and bonds though and we continue to ensure our portfolios are well diversified and structured with an eye to emerging risks and the economic outlook.

This article is for information purposes only. It does not constitute investment advice and is not a recommendation for investment. The value of your investment and the income from them may go down as well as up and you could back less than you invested.

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