Jeffrey Gundlach—DoubleLine Capital, CIO and CEO
Avoid U.S. stocks and corporate debt, and steer clear of long-term Treasuries as rates are likely to resume rising amid swelling U.S. deficits. Best bets are high-quality, low-duration, low-volatility bond funds. “This is a capital preservation environment,” Gundlach said in a Dec. 17 interview on CNBC. “Unsexy as this sounds, a short-term, high-quality bond portfolio is probably the best way to go as you head into 2019.”
Richard Turnill—BlackRock Inc., global chief investment strategist
In equities, we like quality: cash flow, sustainable growth and clean balance sheets. The U.S. is a favored region, and we see emerging market equities offering improved compensation for risk. In fixed income, we add U.S. government debt as ballast against late-cycle risk-off events. We prefer short- to medium-term maturities. In a total portfolio context, steer away from areas with limited upside but hefty downside risk, such as European stocks. “We see a slowdown in global growth and corporate earnings in 2019 with the U.S. economy entering a late-cycle phase,” he said a Dec. 10 note to clients.
Bill Stromberg—T. Rowe Price Group Inc., CEO
U.S. stocks have had a good run. For the next 10 years, 5 percent to 7 percent annual returns would be reasonable. That is less than the 100-year average, but not terrible. Emerging market stocks are starting out a lot cheaper and have a higher dividend yield. You could get 8 percent to 10 percent returns over the next 10 years. If the U.S. dollar weakens you could get more as a U.S. investor, he said in a Dec. 5 interview.
Joseph Davis—Vanguard Group, chief global economist
Expect an economic slowdown but not a recession in the U.S or globally. U.S. growth will decelerate to about 2 percent. No material acceleration in inflation because we are unlikely to see higher wages pass through into higher core inflation. The outlook for U.S. equities over the next decade is in the 3 percent to 5 percent range, in stark contrast with the 10.6 percent annualized return generated over the last 30 years. From a U.S. investor’s perspective, the expected return outlook for non-U.S. equity markets is in the 6 percent to 8 percent range, he said in a Dec. 6 report.
Omar Aguilar—Charles Schwab Investment Management, CIO of equities and multi-asset strategies
Avoid or sell small-cap equities, high-yield bonds and securities with high debt relative to assets, and/or leveraged balanced sheets. Invest in securities that have sustainability in earnings growth and dividends, in sectors such as health care, consumer discretionary and regional banks. Emerging markets have upside given their attractive relative valuations and the prospect of a weaker dollar in the second half of the year. “Decelerating global economic growth, increased attention to trade-related development -- particularly with China -- tighter monetary policies, reduced liquidity, and a mean reversion toward historically average volatility levels are likely to set the tone for equity markets in 2019,” he said in a Dec. 21 email.