Wealth managers and private client specialists reflect on 2018 and look ahead to 2019, report Arun Kakar and David Dawkins
On the year that the financial crisis turned ten, amid Trump tantrums and bull markets, trade wars and trillion dollar valuations – 2018 has left plenty of questions for the year ahead to answer. Spear’s caught up with leading figures in private client finance for their reflections on 2018, and thoughts heading into the year ahead.
Natasa Williams, LGT Vestra LLP, head of private office
How will 2018 be remembered by wealth managers?
‘2018 saw a lot of new wealth on the horizon. Entrepreneurs thrived by doing lucrative exit deals with strategic buyers and private equity alike; corporate profits were solid and dividends paid were high. Yet ten years post financial crisis, we remember the nervousness and endless guessing as to how and when the phase of economic expansion would come to an end. We’ve seen abundant optimism in some months to near panic in others; this has been an erratic year.’
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Biggest surprise of 2018?
The speed with which the cryptocurrency bubble burst. Whilst many were sceptical of the usefulness of cryptocurrencies, there were numerous respected advocates of cryptocurrencies and their value to society. Many technology experts devised clever schemes and numerous garages were converted into crypto mining operations. Fear of missing out (FOMO) rose. And then, all of a sudden, it was all over.’
Biggest concern looking ahead to 2019?
‘Clearly, Brexit is on everyone’s mind in the UK. What concerns me personally is the lack of strong leadership needed to unite the country, and provide an inspired vision of the future; one that can galvanise optimism and change. Whether that is Remain or Leave.
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‘Another concern is the future of the high street. The economic demise of high street shopping has been well documented but it has social repercussions as well. Many people venture out to the shops to interact and engage with members of society, not necessarily to just acquire goods. 2019 could become bleak and lonely for some as their favourite shops close, and they are left to online shop at home.’
Biggest opportunity in 2019?
‘Technology. We are learning to master the technology that is available to us and appreciate it for its advantages rather than allowing it to enslave us.
‘Private market technology investing is accelerating and will provide good opportunities for returns. New technologies are being developed, particularly around top universities, tech investing has become less risky and the cycle from investing to exits has shortened. Most industries are aware of the need to keep up with technology changes and buying in teams and acquiring businesses is often preferable to in-house development projects.’
Word of the year? What does it mean for HNWs?
‘With volatility rising, HNWs are now tracking the markets very closely and following volatility far closer than before.’
Nick Hornby, Managing Partner at Cerno Capital Partners
How will 2018 be remembered by wealth managers?
‘A new weather front came in in 2018. In equity markets, several hot stocks, notably the FANNGS (Facebook, Apple, Amazon, Netflix and Google), saw their share prices punctured. The momentum trade, which had worked do well for a few years, began to break down.’
Biggest surprise of 2018?
‘How quickly and decisively Asian and Emerging asset prices were marked down.’
Biggest concern looking ahead to 2019?
‘Synchronised falls in financial assets and lack of reliable safe havens and the unpredictability of the path of US dollar.’
Biggest opportunity in 2019?
‘Ability to buy assets at good prices. Rest of world begins to outperform the US.’
Word of the year – what does it mean for HNWs?
‘“Experience” – no two cycles are the same but sometimes they chime. As the world tends to instability we don’t necessarily expect equilibrium.’
David Lamb, head of dealing at the foreign exchange specialists Fexco Corporate Payments
‘Excruciating though it was, the endless uncertainty thrown up by Brexit was less of a surprise in 2018 than the Trade War that erupted between the US and China.
Barring a major climbdown, these could descend into an all out Trade War in 2019, throwing a spanner into the wheels of global trade and potentially driving up the value of the Dollar if global investors seek shelter in the world’s safe haven currency.’
Oliver Gregson, J.P. Morgan Private Bank Head of UK & Ireland
Thoughts on 2018?
‘The “twittersphere”, and particularly the impact of twitter on markets, on sectors and on companies is definitely something that has taken a degree of adjustment.
I think the level of positivity that the industry had at the beginning of the year and the expectations in terms of returns on a whole range of asset classes verses the realised reality.
‘I think in many ways, the return of volatility [has been a big thee of the year]. Although three of the four largest central banks are still pedal to the metal, the return of volatility as the market starts to price in and expect the end of that dynamic has been a big factor for a large period of time we saw very small down or up days, and that was now the norm. Especially in the last quarter, you’ve seen three, four, five hundred point moves on the dow and 2-300 basis point movies on indices becoming much more the norm.’
Thoughts looking ahead?
‘Where we think the end of cycle is on top of us, where we are talking about de-risking portfolios, but critically, the most important element to generating long term capital growth is time in the market not timing the market.’
What are some of your concerns heading into 2019? Are you worried about the trade war, for instance?
‘Our central case, base case is still one where we expect an 80 per cent probability of recession in 2020.
‘Markets are a future pricing organism, they price in future expectations. Some of that is what you are seeing right now, but broadly economic indicators have slowed but they are still in growth mode, they’re not indicating recession. That’s why 2019 for us is an important year, but one ultimately of transition into a world where we think recession will happen in most likely in 2020.
‘Recessions are the single biggest and best predictor of a bear market.
‘The trade war and what we’re seeing right now with Huawei is a major concern if that expands, if that evolves into something much more.
‘We’re seeing some of those things in terms of much more right now – whether that’s reviewing Chinese investments into the US; there have been some changes there.’
What gives you cause for optimism looking ahead?
‘It’s always better than we think it is. If you think about the last ten years, less people are dying, there’s less disease, less child mortality, more people in work, more companies, more economic growth than we think.
‘By far, the biggest central tendency is one of economic growth. The bulk of recessions are not the norm and so, despite some challenges ahead, I think in the wider context of things and in the longer term pespective of time, it’s not as bad as we always think it is.
Arun Kakar and David Dawkins write for Spear’s
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