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Monday, 10 December 2018

2019 looks good for Egypt, but expect the US economy to slow down and a bear market for American equities

2019 looks reasonable for Egypt, less so for other emerging markets -EFG: EFG Hermes’ 2019 yearbook suggests that a “sustained recovery” in emerging markets is unlikely until the US Federal Reserve ends monetary tightening. The Fed is expected to continue hiking up rates until mid-2019, says the report, which predicts that “EM currencies could move lower from here.”

Look at Egypt, Nigeria, Kuwait and Saudi next year: Egypt and Nigeria are inexpensive markets with room to cut interest rates in 2019, while KSA and Kuwait will benefit from index inflows. Egypt remains undervalued even following the correction from April’s high, EFG Hermes’ research teams says, and rate cuts could spur a rally.

What shares is EFG tipping? Juhayna in Egypt as a proxy for a consumer recovery as well as Saudi’s Al Rajhi Bank and Kuwait’s Gulf Bank.

Further afield: The IMF’s chief economist thinks the US economy is going to slow down, the Financial Times reports, as Maurice Obstfeld warns that the “air is coming out of the balloon” around the world. But Obstfeld isn’t expecting the US to fall into recession — instead, he sees growth to progressively slow down in 2019 and 2020. That comes as business confidence in America has fallen for the third consecutive quarter. US CEOs are still optimistic, just not as much as before, according to a survey by the Business Roundtable.

Want more from the crystal ball set? Go read former Mideast hand Robin Wigglesworth’s latest column for the Financial Times, wherein he looks at how strategists are calling 2019 for US equities and other markets and instruments. Among the takeaways:

  • 2019 will see the return of the bear, implying another 10% drop for US equities from their current level
  • Value stocks could outshine growth stocks amid what Morgan Stanley thinks will be a “major leadership change occurring from growth to value which could be more long-lasting than most appreciate.”
  • Gold could regain its glitter after a disappointing 2018
  • Cash will be king — rising US interest rates could see cash return 2.8% in 2019

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