April 2019

The Janus Henderson Global Snapshot explores the themes driving markets, the trends to watch, market returns and metrics, and the Multi-Asset Team’s outlook for regions and sectors at quarter end.


Central banks shift dovishly as activity and inflation news stays weak

Image_The USA flag
Image_The Chinese flag
Image_The Japanese flag
Image_The European Union flag
Image_The Union Jack Flag
Image_A selection of Emerging Markets flags



Fed U-turn
The Federal Open Market Committee tore up its December guidance for two interest rate hikes during 2019, signalling a neutral policy stance. Core consumption price inflation (excluding food and energy prices) remained below the 2% target at 1.8% in February.


Tax cut
The VAT rate for manufacturers was reduced from 16% to 13% as part of a fiscal package designed to achieve GDP growth of 6.0-6.5% in 2019 - down from 6.6% in 2018. Purchasing managers’ surveys firmed in March, raising recovery hopes.


Target failure
The Bank of Japan left policy unchanged. This was despite lowering its forecast for consumer price inflation, excluding fresh food and the impact of a coming VAT hike, in fiscal year 2019 from 1.4% to 0.9% – far below the 2% target.


Further weakness
GDP growth grew by only 0.2% in the fourth quarter, while the manufacturing purchasing managers’ index hit a six-year low in March. The European Central Bank strengthened its dovish interest rate guidance, signalling no rise before 2020.


Brexit pile-up
Labour market data remained solid but business confidence weakened sharply on rising fears of a no deal Brexit. Manufacturing purchasing managers’ surveys reported record stockpiling to protect against supply disruption in the event of a disorderly departure.

Emerging markets

Inflation fall
Declines in oil and food commodity prices in late 2018 fed through to lower consumer price inflation, although core pressures were little changed. Russia was a notable exception, with a VAT hike adding to a rising inflation trend.

Trends to watch:


Inventory adjustment
Business inventories surged in late 2018/early 2019 as demand undershot firms’ expectations. Production cut-backs to clear the overhang may cause GDP growth to fall short of forecasts, with negative effects transmitted through global supply chains.


Monetary weakness
Stronger purchasing managers’ surveys and reports of progress in US/Chinese trade talks have boosted economic recovery hopes, but money and credit trends remain weak – a pick-up is needed to confirm that policy stimulus is working.


BoJ policy rethink?
Inflation remains too low but JGB yields are also undershooting, implying a further slowdown in official bond-buying. Will the Bank of Japan rejig its policy in another attempt to provide stimulus or admit that inflation is unlikely to reach its target?


Survey turnaround?
Business surveys could be bottoming. Economic weakness was foreshadowed by a monetary slowdown in late 2017/early 2018 but money trends have recovered since late 2018, suggesting improving economic prospects – assuming no external shocks.


Business retrenchment
Corporate money trends have deteriorated, reflecting a wage squeeze on profits and cash depletion due to stockpiling of imported inputs. Similar weakness historically has presaged investment and job cuts and a slowdown or contraction in economic activity.

Emerging markets

Fragile currencies
Central banks have shifted dovishly following currency recoveries and a fall in headline inflation, but policy easing could backfire – core inflation trends are less benign and exchange rates could come under renewed pressure unless the Fed cuts rates.

Source: Janus Henderson Investors at 31 March 2019. These comments are the views of Simon Ward, Economic Adviser, and should not be construed as investment advice. These views may differ from those of other Janus Henderson fund managers.


Equity market returns for Q4 2018 (%)Local currencySterlingDollarYTD sterlingQtr dollarYTD dollar
US S&P 500-14.0-6.2-11.9-0.4-14.0-6.2
Japan: Topix-17.8-17.8-12.9-10.4-14.9-15.6
Euro area: Euro Stoxx-13.2-14.8-12.5-13.8-14.5-18.9
UK: FTSE All Share-11.0-13.0-11.0-13.0-13.1-18.0
MSCI Far East ex Japan (US$)---8.0-12.1-10.2-17.2
MSCI Emerging Markets (US$)---5.6-11.5-7.9-16.6

Source: Thomson Reuters Datastream, Janus Henderson Investors, index price returns, as at 31 March 2019.
Note: the TOPIX Index Value and the TOPIX Marks are subject to the proprietary rights owned by the Tokyo Stock Exchange, Inc. and the Tokyo Stock Exchange, Inc. owns all rights and know-how relating to the TOPIX such as calculation, publication and use of the TOPIX Index Value and relating to the TOPIX Marks. No Product is in any way sponsored, endorsed or promoted by the Tokyo Stock Exchange.

 Forecast P/E 2018Forecast P/E 2019Forecast EPS growth 2018 (%)Forecast EPS growth 2019 (%)
Emerging markets11.310.411.99.0

Source: Thomson Reuters Datastream, Janus Henderson Investors' calculations, and IBES (institutional Brokers' Estimates System) estimates for MSCI Indices as at 31 March 2019. Forecast EPS (earnings per share), Forecast P/E (price-to-earnings ratio).

Consensus GDP growth forecasts (%)201820192020
Euro area1.91.61.5
Asia ex Japan6.05.75.6

Source: Bloomberg, economic forecasts, as at 4 April 2019. Forecast GDP = real gross domestic product.

Euro area: EU member states using euro currency (currently 19)
Asia: China, Hong Kong, Indonesia, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam
BRICs: Brazil, Russia, India, China
World: G10, Eastern Europe & Africa, Asia, Latin America, Middle East

Consensus inflation forecasts (CPI %)201820192020
Euro area1.71.71.6
Asia ex Japan2.42.52.6

Source: Bloomberg, economic forecasts, as at 4 April 2019. Forecast CPI = consumer price index.

Bonds31 December 2018 yieldQtr return %YTD return %
US 10-year Treasury2.693.81-2.90
Japan 10-year government bonds0.001.320.72
Germany 10-year bund0.252.242.87
UK 10-year gilts1.272.770.61
Corporate bonds: (Barclays Global Aggregate Corporate Index $)--1.05-5.35
High yield: (Merrill Lynch Global High Yield $)--3.79-3.33
Emerging market debt (JPM Global Emerging Markets Debt $)--1.19-4.61

Source: Thomson Reuters Datastream, Janus Henderson Investors, as at 31 March 2019.

Currencies and commodities31 December 2018Qtr change %YTD change (%)
S&P GSCI Total Return Index $--22.94-13.82
Brent oil ($/barrel)--35.83-20.24
Gold bullion ($/Troy oz)-7.54-1.70

Source: Thomson Reuters Datastream, Janus Henderson Investors, as at 31 March 2019.

The above data is intended for illustration purposes only and is not indicative of the historical or future performance or the chances of success of any particular strategy. References made to individual securities should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase the security.


Please note the below are the views of the UK-based Janus Henderson Multi-Asset Team at quarter end. They do not represent a Janus Henderson house view or the views of individual fund managers and should not be construed as investment advice.

Positive Up icon    Neutral Neutral icon    Negative Down icon


Image of a Bond certificate
Global corporateRecent risk-off sentiment has led to broad-based underperformance. The asset class is at further risk from slowing earnings growth.
UK giltsMixed economic data prints and Brexit uncertainty have kept yields at low levels, but this asset class offers good diversification amid equity volatility.
Global sovereignUpwards pressure remains on yields due to the unwinding of quantitative easing and monetary tightening, but risk-off sentiment has kept yields at low levels.
Emerging market debtCountry-specific risks remain a headwind but tempering dollar strength and attractive spreads present a potential entry point in local currency debt.
High yieldSpreads have been widening and the asset class is further at risk from fiscal tightening and slowing global growth.


Image of a bull and a bear
UKThe UK market appears attractively valued, as do dividend yields. However, Brexit-related uncertainty continues to weigh on investor sentiment.
EuropePolitical uncertainty will continue to cloud the market outlook but we remain constructive owing to attractive valuations.
USDespite a correction in valuations during the recent sell-off, monetary stimulus is fading and corporate profitability is at risk of downgrades.
JapanJapanese market valuations are at very attractive levels but risks in the form of trade war tensions and a strengthening yen still remain.
AsiaWhile trade tensions have been a headwind to the region, share price valuations and corporate earnings remain constructive.
Global emerging marketsIdiosyncratic risks and a strong dollar have provoked outflows, but sentiment seems bearish in light of attractive share price valuations and tempering dollar strength.


Image indicating various currencies
£/$Brexit-related volatility plagues the UK, while a rising debt burden and trade war concerns dampen dollar bullishness.
£/€Political developments seem likely to continue to drive headlines and market moves on both sides of the Channel.
£/¥Risk sentiment is likely to affect the yen, while Brexit drives news flow and Japanese monetary expansion continues in the background.


Image of stacked gold bars
PropertyProperty appears expensive and typically struggles in a rising interest rate environment. However, yields remain higher than many asset classes.
GoldGold is a useful hedge to hold as markets become more volatile. Returns have improved as demand has increased in the recent risk-off environment.
OilPoor supply and demand dynamics have hit oil prices, but this has scope to rebound as markets price in a slightly better macroeconomic outlook for 2019.


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