BlackRock maps out likely themes for 2019

BlackRock three market themes likely to shape 2019.

Slower growth:

BlackRock sees global growth and corporate earnings growth moderating next year, with U.S. growth stabilizing at a higher level than other regions.

U.S. earnings growth expected at 9% vs. 24% in 2018; emerging markets set to keep double-digit earnings growth led by China and its tech sector.

Nearing neutral:

The Fed looks likely to pause tightening process as interest rates near neutral. BlackRock estimates current U.S. neutral rate at about 3.5%, but sees it between 2.5% and 3.5% in the long run.

Sees pressure on asset valuations easing as a result.

Balancing risk/reward:

Recession fears combine with trade fears in 2019, even though BlackRock sees risk of a U.S. recession in 2019 as low, citing still-easy monetary policy, few signs of economic overheating, and a lack of elevated financial vulnerabilities.

Advocates exposure to government debt along with "high-conviction allocations to assets that offer attractive risk/return prospects."

Quality historically outperforms other equity style factors in economic slowdowns, according to BlackRock analysis. EM equities also good candidates, the firm says.

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