Your Q3 2019 outlook

There are lots of decisions we have to make when it comes to investing your money, from understanding how much risk you want to take and working out what investments to put your money into, to designing strategies so we can get you the best possible returns. The economic cycle and market conditions are really important when it comes to making these decisions, because they can affect how your investments perform, so we always play close attention to what’s going on.

To keep you updated, each quarter, we speak to Trevor Greetham, Royal London’s Head of Multi Asset Investments, to find out what’s been going on in the global economy and how this could have an impact on your money.

CAPTION: The uncertain outcome of Brexit means the UK is in limbo, and the standoff between the US and China over trade wars means tensions are mounting… so how will this affect interest rates, stock markets, property prices and trade tariffs in the next few months?

TREVOR GREETHAM: Hi, I’m Trevor Greetham, Head of Multi-Asset for Royal London Asset Management. I’ll be talking to you about the economic outlook over the next 3 months.

It’s really a mixture of economics and politics. You’ve got two big things going on. You’ve got a stand-off between President Trump and China over trade wars. You’ve also got a stand-off between the UK government and the European Union over Brexit.

Starting with the global picture, the world economy has been slowing down over the last year or so, and we’ve had a lot of bad news in the auto industry, and bad news out of China.

We’ve also had an increase in tensions between President Trump and the rest of the world over trade, which has been hurting growth at same time. But the US consumer remains strong, and this has been a very long economic expansion, because inflation has remained low and therefore interest rates have remained low.

We think that expansion will carry on. We’ve had an interest rate cut recently in America. We may see another one in the next 3 months. That will help to boost the US consumer, and we think the world economy will probably pick up again into 2020.

There’s also a strong possibility that President Trump will backtrack on some of the trade tariffs he’s been pushing through, ahead of the 2020 presidential election in America. He may want to see the economy get stronger as well.

Closer to home there’s a lot of uncertainty around Brexit. The UK is due to leave the European Union on 31 October. At this stage we still don’t know whether we’ll leave with no deal, whether they’ll be some new kind of deal, or whether we won’t leave at all because the decision may be deferred until further out.

If we were to leave with no deal, I think the pound would continue to go down. It’s likely to be quite damaging for the UK economy over the medium term, if we leave without a deal. But there are parts of the portfolio that would do better if the pound were weaker. So stock markets, in particular, will increase in value if the pound goes down. On the other hand if there is a better deal in there or Brexit is deferred then the property part of your portfolio is likely to do better.

So you’ve got a mixture of different assets and that should even out some of the bumps in what is quite an uncertain situation.

The big picture though is, lots of politics around at the moment. Some bad news in terms of the economy, but we think the world economy is likely to rumble on.

We’ll continue to monitor things, and we will report back to you on the situation as it evolves in 3 month’s time.

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