// GESPONSORDE BIJDRAGE
Investing in times of global uncertainties BY OLAF VAN DEN HEUVEL, CHIEF INVESTMENT OFFICER AT AEGON ASSET MANAGEMENT NL
The global economy has shifted into a lower gear in the past few quarters. Following a period of a strong and broad-based economic momentum, soft spots in the economy emerged in the second half of 2018 and continued into 2019. Growth decelerated across the board, with more pronounced weakness among countries and sectors where trade and manufacturing play an important role. The slower growth fits into a dynamic of high policy and political uncertainty, which weighs on global investment and confidence. Slower growth is also caused by ongoing trade tensions. Not even a year ago, central banks
before eventually further extensions
for most developed countries, the
around the world were tightening
were agreed upon. Simultaneously, the
weakening of the manufacturing sector
monetary policy. Most importantly, the
sentiment of the trade talks between
did have an impact on the broader
Federal Reserve increased policy rates
the US and China oscillated from friendly
economy. In Germany, where the
several times on the back of a solid
to hostile and back on numerous
(automobiles) manufacturing sector is
economic paradigm in the United
occasions. Meanwhile tariffs have been
an important driver of the economy, the
States, and it was expected that the
increased substantially and the overall
weakness was visible. Growth in the
tightening cycle would continue. Only
impact of the ongoing uncertainty had a
largest eurozone economy has declined
months later – after several economic
negative impact on the economic
to around 0%.
indicators disappointed and risk assets
momentum over the course of this year.
central banks reversed course and
Global growth decelerated, with specific
Two scenarios to identify attractive and robust assets
started to ease policy to support the
weak spots. The economic cooling in
We argue that the path of the economy
economy. Other good examples of the
Germany is a telling example for the
in the coming period remains
quickly changing conditions are the
global economic activity. This is
dependent on the outcome of the highly
trade tensions and the Brexit process.
illustrated by two charts. Figure 1
uncertain binary events. As these fluid
shows the softening of the manufacturing
events might have a major impact on
The Brexit path was rife with uncertainty
PMI, indicating that the industrial sector
the economy, we decided to construct
and the political stance has fluctuated
is in a soft patch globally. Even though
two scenarios – rather than one basis
between a deal and a no-deal Brexit
the services sector is more important
scenario – to account for the highly
sold off in the final months of 2018 –
uncertain environment. In our positive scenario, growth in the
Figure 1: Global Manufacturing PMIs
coming years remains close to the current level. This scenario is likely to materialize if the trade dispute is resolved, and if the recent weakness in the manufacturing sector does not persist. In the absence of adverse shocks, the cycle can continue in the coming years. Still, we foresee slower growth in comparison to previous years as capacity constraints in pockets of the economy have intensified. In this positive scenario we expect global monetary Source: Aegon Asset Management
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policy to remain accommodative – possibly in combination with a fiscal
