Market Commentary

Prudential’s chief market strategist says the recession “tug-of-war” in the market won’t abate until there’s clarity in the data.

In QMA’s 2019 Outlook & Review, QMA’s Ed Campbell and the global multi-asset solutions team take on the daunting task of peering 12 months into the future. Will 2019 bring a return to more placid and pleasant times, or are treacherous markets likely to remain as the calendar turns?

In its Trends for 2019 outlook, PGIM Real Estate’s investment research team says that despite concerns about elevated real estate pricing, a perceived lack of available stock, heightened political uncertainty and a shifting policy environment, there is still plenty of capital targeting real estate.

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.

Are we transitioning to a slower but still solid economy, as the Federal Reserve suggests, or a deeper downturn that could result in a recession?

Trade tensions and the ongoing crisis in emerging markets top the downside risks. Trade uncertainty has now seeped into the GDP and business confidence data for Europe and Japan, while the combination of trade tensions, fears of Turkish lira contagion, and Fed rate hikes have contributed to slowdowns in a number of EMs, including China. On balance: The near-term risk of a global downturn remains very low. But storm clouds are gathering.

When investors recall the third quarter of 2018, many may cite the fractures that occurred in certain corners of the fixed income market. In its fourth-quarter outlook, PGIM Fixed Income evaluates the extent of the damage, the factors that contributed to the periodic volatility, how these issues may unfold going forward, and the nature of the opportunities that lie ahead.

While 2018 should finish on a high note, 2019 may provide many challenges, including the fading of fiscal stimulus, peak earnings and intensified scrutiny of the yield curve as concerns mount over the strength of the expansion. Choosing heads or tails correctly will matter as liquidity continues to be drained from the global financial system and accommodation wanes, says Quincy Krosby, Prudential's chief market strategist in her Q4 2018 market commentary, “Heads or Tails.”

Earlier this year, global economic growth appeared to be coasting, with all major economies growing in unison for the first time since 2010. However, paths now appear to be diverging, shifted by escalating trade tensions, Italian politics and pockets of emerging market turmoil, according to QMA’s Q3 2018 Outlook & Review.

A dramatic sell-off has made the Turkish lira cheaper on an inflation-adjusted basis than it has been since the 1990s, but there are good reasons to avoid exposure to Turkish markets until an orthodox policy response from the government is forthcoming, according to PGIM Fixed Income’s macroeconomic team.