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Have we entered a period where unproductive, volatile markets will be the norm or was 2018 a fluke?

January 14, 2019

Last year was an inhospitable one for markets—most bond market returns were low or negative, and stock returns were negative as well. Have we entered a period where unproductive, volatile markets will be the norm or was 2018 a fluke?

PGIM Fixed Income’s first quarter 2019 outlook follows a period of heightened market volatility and notable developments in politics, monetary policy and economics. Yet, as several of PGIM’s portfolio managers note, amid stable, more moderate global growth, recent volatility may have opened a window of near-term opportunities. Still, lingering uncertainties could contribute to further stretches of turbulence ahead.

When considering conditions going forward in “More of Less,” Robert Tipp, chief investment strategist, looks at the dynamics behind flagging investment returns and the recent uptick in volatility. With this combination likely to re-emerge and possibly unnerve investors throughout the year, Tipp also examines how investors might make the best of the situation.

“While we expect government bonds to generally outperform cash over the long run, that outperformance is likely to be both less substantial, and less consistent, than it has been in recent decades,” writes Tipp.

What are investors to make of the concerning signs of slowing global economic growth? In “Embracing the Virtues of Lukewarm,” Nathan Sheets, chief economist and head of global macroeconomic research, explains the observed step down in activity is a natural phenomenon as individual economies move to more sustainable growth rates. The fact that global growth has slowed and become less synchronized compared to a year ago is hardly surprising. The bigger surprise is how rapid growth had been.

“We see the current slowdown as a return to business as usual, rather than signaling the onset of a malignant set of factors,” Sheets says.

Read PGIM Fixed Income’s Q1 2019 Outlook: “More of Less; Embracing the Lukewarm” and find more 2019 views on PGIM.com.

For a media interview with Robert Tipp or Nathan Sheets to speak about market or economic conditions, please contact Claire Currie.