Things to invest in 2019 – 6 Markets to Keep a Close Eye On

The year 2018 is behind us. And, if we were to describe its effect on the global economy in one word, then you’ll probably agree with us that turbulent fits it perfectly just by looking at the facts.

An endlessly ongoing trade war. Cannabis shares surging in price. Cryptocurrencies hitting record lows. A seemingly disjointed UK parliament failing to progress the Brexit negotiations. All these events sent mixed signals to investors and forced them to constantly re-update their portfolios in the hopes of catching up with the racing market trends.

Will the same thing happen in 2019? Let’s find out.

The good news is that, at least for now, the new year is shaping up to be more forgiving to the global economy. And while it’s too early to predict if the latter will fully rebound from its mini recession, some analysts speculate that, when thinking about what to invest in 2019, investors stand a chance of being drawn like moth to a flame by 6 particular markets. Let’s briefly discuss each of them below.

#1. The gold market

 

The reason for humanity to hold onto gold bars hasn’t changed much for the past 5 000 years. In addition to being a driving power in the jewelry-making business, gold has another crucial value—that of guaranteeing the value of currencies. And as signs of a worldwide economic slowdown become increasingly apparent, it is not unlikely for both banks and investors around the world to revisit the yellow metal as a means of diversifying their portfolios.

Pictured: a price graph of silver for the period 01.01.2018-31.01.2019

Source: DF Markets

There’s only one small catch. According to some analysts’ predictions, gold could only break out of its current 1300/1380 resistance levels if the equity markets go through another sell-off wave like the one we witnessed in Q3 2018. If that happens the yellow metal could potentially reach (or even surpass) the 1590 level. Here are some signs that suggest such scenario may be coming:

  • The US Federal Reserve is no longer pushing for interest rate hikes, which could lead to a noticeable increase in gold’s value;
  • A major spike in the gold’s price graph is expected in the first quarter of 2019 due to several gold-centric Indian festivals;
  • In Q4 2018 gold saw a growth rate of 5% on the back of a negative US500 index performance (-11,9%). The general consensus is that gold may continue to grow even further considering its inverse relationship with the falling greenback;
  • A report done by the World Gold Council reveals that in 2018 alone central banks added a whopping 651,5 tonnes to their official gold reserves. That’s 74% more than what they added in 2017!

#2. The Pound Sterling

Pictured: Pound sterling in coins and banknotes

Source: Pexels.com | Photographer: Suzy Hazelwood

It’s true that the past few months have been a wild roller coaster ride for the UK money market. The British pound suffered especially heavy losses against the USD when the British parliament rejected Prime Minister Theresa May’s Brexit strategy. Despite this, on January 15th the GBP posted a strong rally against the USD as traders’ fears of a hard Brexit had all but dissipated.

According to some financial circles, the GBP may be on its path to becoming one of the most bullish currencies of 2019. Two currency pairs shape up to be especially favourable for the British pound—the GBP/EUR due to Brexit and the GBP/JPY due to interest rate play. All of that being said, please remember that past gains are not indicative of future performance and that the British currency should by no means be seen as a safe haven investment.

We think there are still a lot of risks out there. Certainly the defeat of May’s proposal . . . takes away one leg of uncertainty but we still have many others,” said in an interview with CNBC Patrick Bennett, a strategist at the Canadian Imperial Bank of Commerce. “We can see the sterling higher against the weaker dollar over this year. But against other major currencies, we think the sterling will remain and underperform, appropriately so, until that uncertainty has been taken out,” he added.

For the time being, economists believe that GBP/USD will remain capped at about 1.30/1.31 for the next few weeks to come. As for what direction the pound sterling will steer in next will mainly depend on how the UK Parliament will handle future Brexit negotiations.

#3. Crude oil

 

However unfortunate, all those numerous geopolitical conflicts around the world could mean good news for traders since they can introduce further volatility in an already unstable crude oil prices. Here are 4 reasons why long-term investors might benefit from crude oil in 2019.

Pictured: a price graph of Brent crude oil for the period 01.01.2018-31.01.2019

Source: DF Markets

1. According to preliminary OPEC estimates oil demand is expected to diminish. This view is backed by Goldman Sachs which points to an oversupply problem.

2. The recent trading stand-offs with the US significantly weakened China’s economy. The country reported low manufacturing growth rate and expects GDP growth to decline.

3. We currently face the longest bullish ride in global markets’ history. This achievement, however, is increasingly diminished in value by the slowing economic growth, multiple ongoing trade wars, and a reeling US stock market.

4. The consequences of the sanctions and US waivers on Iran will likely slow down barrel output for the duration of 2019.

#4. The property market

Pictured: a builder with a protection helmet inspecting a house from the outside

Source: Pixabay.com | Photographer: jarmoluk

These days the media is ripe with reports about the UK housing bubble and how it has supposedly burst. “Great”, you say, “but what good is it if home prices remain exorbitantly high?”

Not for long, according to the Daily Mail. Back in April 2016 the government introduced a hefty 3% stamp duty to discourage people from purchasing new properties other than their main home.

It later also introduced a punishing rental income tax which severely restricted the income of small landlords. As a result nearly 3 800 properties in Great Britain are now being offloaded each month, while the number of “fresh” landlords for the past decade has diminished by 60%.

Naturally, both measures severely hampered the UK housing market, which by November 2018 reported a growth rate of mere 2.8%. This creates ample opportunities for those looking to invest in buy-to-let ventures if they can deal with the rather steep mortgage costs.

#5. Apple

 

In 2018, Apple (AAPL) was the first publicly traded company in the US to hit a $1 trillion market cap. Yet in Q4 the company reported its worst year in almost a decade since:

    • The company’s latest iPhone release did not have the expected impact;
    • The trade war with China significantly crippled Apple’s profits in the region;
    • The steep price curve of Apple devices failed to compete with the much less expensive Android alternatives that have flooded the market in recent years.

Pictured: a price graph of AAPL stock for the period 01.01.2018-31.01.2019

Source: DF Markets

As a result some investors are deeply worried about the company’s future, fearing another decline in Apple’s share price and being fully mindful of the fact that the company generates about 20% (approximately $51.9 billion) of its total revenue from China—a country that is being increasingly dominated by leading Android device makers like Huawei and Xiaomi.

Despite its less than stellar performance in recent weeks Apple still enjoys worldwide recognition and some experts speculate that the next smartphone release might be a chance for Apple to wow the audience and set firm footing in the budget smartphone segment.

#6. Deutsche Bank

Pictured: Deutsche Bank

Source: Pixabay.com | Photographer: FynnWu

It’s no secret that Deutsche Bank, unlike many of its competitors, never really fully recovered from the 2008 economic downturn. And judging by the bank’s poor performance in 2018, the chances of Deutsche Bank’s share price to make a comeback seem pretty slim. Here is why:

  • Last year saw Deutsche Bank (DBK/g) shares hitting record-breaking lows of just €8,87 on market close—the worst performance since 1992!
  • Questionable financial decisions by CEO Christian Sewing lead to the bank losing  €409 million in Q3 2018.
  • Declining revenues, outdated technology, mounting expenses, heavy fines and a recent credit rating downgrade all prevent the bank from rebounding.

Considering all of the above, what can the bank still do to get out of its losing situation? Some analysts forecast that Deutsche Bank is planning a merger with Commerzbank, its direct competitor. Should the prediction ring true and considering what happened to Lehmans in 2008, this scenario will undoubtedly provide long-term investors with a way to diversify their portfolios.

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