DBS: Bear Market in 2019 Unlikely
While the bank expects slower growth in 2019, a recession is unlikely, with a tug of war between bull and bears to result in a non-trending environment for broad market indices.
Despite the slowdown seen in China and the United States, we are not at the start of a bear market for equities, DBS Chief Investment Officer Hou Wey Fook said at a media briefing to launch the bank’s CIO Insights 1Q19 publication on Friday.
«The ongoing tug of war between bulls and bears is likely to result in a highly volatile, non-trending market,» Hou said.
He added that there remained a risk of a trade war between the United States and China, which could exacerbate the slowdown, though if there a resolution emerges, markets could see the bottom soon.
«Balanced» macro environment
The bank’s CIO said that the macro environment for 2019 was «balanced», with no strong headwind nor tailwind.
Hou pointed out that a repeat of previous recessions was unlikely as compared to 1987, there is no lure for capital to move out of equities to bonds, and unlike the early 2000s, tech companies are earning more. As for the 2008 global economic crisis, banks were heavily leveraged and undercapitalised. «Today, banks are operating normally,» he said.
However, the bank is not bullish, as black swan events – U.S.-China trade war, impeachment of U.S. President Donald Trump, political chaos in Europe, and inflation upside surprise – remain risks, he said.
