The economic conditions for the global economy darkened at the end of 2018 due to geopolitical conflicts (US trade policy, BREXIT, Italy/EU conflict, yellow vest protests France). We are also expecting continuing geopolitical uncertainty for 2019, especially with regard to a possible no-deal BREXIT at the end of March. By contrast, in the US trade conflict with China, we expect an agreement in the coming months, since the economic pressure, especially on the Chinese side, is increasing with the emerging export weakness. Due to the late cycle economic slowdown, we expect global economic growth in 2019 to be +3.3%. This figure is slightly below the long-term average of +3.5% since 1980. A glance at the global framework data indicates regionally uneven development of the global economy in which the higher emerging market- and US growth make up for weaker data from Europe and Japan. We forecast GDP growth for the USA in 2019 of +2.2%, for the Eurozone of +1.2% and for China of +6.1%. Overall, downward risks dominate for the course of the global economy. But despite the nine-year existence of the current recovery, we do not expect any recession, but rather slowed growth due to stabilising counter-effects. We expect these effects both from the monetary policy of the most important central banks as well as from the fiscal policy of individual governments.

In the USA, we predict a slowing in the cycle of rising interest rates due to the declining business confidence with only one interest rate increase of a quarter of a percentage point. In addition, the inflation rate is close to the Fed's target. We see the biggest risk for an increase in the inflation rate in a rising wage-price spiral, following a clear rise in hourly wages in the fourth quarter of 2018. However, the effect on inflation will be cushioned by digitalisation. Due to reduced growth forecasts in the Eurozone and lower core inflation in 2019, we do not expect any interest rate increase. We expect the governments in China, the United Kingdom, Italy, Japan and Germany to implement an active fiscal policy through tax and spending-related measures to support growth.

In view of the late phase of the economic cycle, we only expect slight growth in corporate profits at the individual company level. For the investment class shares this means that it is necessary to find a balanced position between the low growth in corporate profits and a potential slide into recession. Valuations provide support, since these have recently undergone a clear fall to below the average of the last ten years. This environment could represent a good basis for moderately rising share prices.

We expect low, single-digit percentage growth in corporate profits for the segments USA equities, Europe equities and German equities. The basis for our forecasts for the year-end 2019 are: S&P 500 Index 3,000 points, Euro Stoxx 50 Index 3,400 points and DAX 12,100 points. The outcome of the US trade dispute with China and of BREXIT are especially important for the international equity markets, apart from the weakening of world economic growth.

The USA equities segment is benefiting from the current robust condition of the economy, which is based in particular on the high volume of investment, rising wages and full employment, which together are producing higher consumer demand. At 68%, consumption constitutes a relatively large proportion of GDP in the USA. The European equities segment is characterised by several home-made problems, such as the risk of a no-deal BREXIT, social unrest in France and low economic growth in Italy. The impending elections to the European parliament in May 2019 could also result in a loss of votes for the established parties and further inflame the political structural crisis. However, the structural problems of the Eurozone continue to be countered by the expansionary monetary policy of the ECB, although it is structural reforms and budgetary discipline by the national governments that are needed.

At the end of 2018, bonds still constituted a highly rated investment class. Attractive interest yields can be found outside the Eurozone, e.g. in the USA or emerging markets. In the portfolio context, bonds continue to play an important role in terms of diversification and to control portfolio risk. We expect the return on 10-year Bunds to increase to 0.50% at the end of 2019 and on 10-year US Treasuries to 3.00%. The market for corporate bonds was in a stable fundamental condition at the turn of 2018/2019. However, the pressure on investment grade and high-yield bonds will increase both in Europe as well as in the USA in this late phase of the economic cycle. We consider the main cause for this to be the declining growth in profits and only to a lesser extent to an increase in the default rate. Within the bond segment, we rate emerging market bonds as relatively attractive, since on the one hand emerging markets will also enjoy much higher economic growth than the industrial countries and on the other, external vulnerability has declined markedly in most emerging markets due to lower balance of payments deficits. In addition, spreads in 2018 have expanded greatly in recent months and provide a certain protection against rising interest rates. For 2019, we expect an end to the strength of the USD and forecast a EUR/USD exchange rate of 1.20, especially against the background of a slowdown in the rate of US economic growth and a provisional end to the cycle of interest rate hikes in the USA.

The influence of geopolitical and macroeconomic risks could result in shocks in the coming quarters at any time, which could trigger fluctuations in the capital markets. It should be borne in mind in this regard that several looming political risks could also end positively. A solution to the US trade conflict and as orderly a BREXIT as possible, or even better an exit from BREXIT, would be positive for the development of core macroeconomic factors. Given such conflicting forces, the asset management portfolio should be able to exploit its advantages for active management and the use of different capital market segments.

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