Pension adviser Mercer has stepped up its warning for trustees of Irish pension funds, saying the year ahead promises to be "challenging" for investors amid “tectonic frictions in the global world order”.
The warning comes after stockmarkets fell sharply before Christmas, which left the Iseq index of Irish shares among the worst performing in Europe for 2018.
Since the start of the year, shares badly hit in Ireland last year, including house builders and banks, have staged some sort of rally.
However, in its report, Economic and Market Outlook 2019 and Beyond, the investment adviser said the investment year will be dominated by the “white waters of the late cycle” and a switch to “sustainable investing”.
Current market dynamics include strong consumer spending, improving labour markets and rising wages, but investors are balancing these positives against rising interest rates, concerns over peak corporate earnings and trade wars,” said Mercer.
Meanwhile, the huge JP Morgan Asset Management has turned more constructive on prospects for global stockmarkets, saying it saw opportunities among cheaply valued mid-cap companies and financials following a year of weak returns.
“Many of our investors now see an above-average level of opportunity across areas of global stock- markets,” said Paul Quinsee, global head of equities at the US asset manager, in a research note.
“Our value team is seeing more constructive opportunities, including investing in financials and small caps; our emerging markets investors are expecting improved returns ahead ... though much depends on China,” he added.
Quinsee said at current valuations, small caps looked more attractive than they had been about three-quarters of the time in the last 28 years. He said many banks and insurance companies now looked interesting.
The more upbeat tone from one of the world’s top asset managers adds to signs that investors’ mood is improving even though expectations for corporate profits are still proving too optimistic and trade tensions continue to pose a risk.
Additional reporting Reuters