December 13, 2018

Toronto, Canada

  • Launches Global Outlook, Themes and Opportunities papers
  • Insights assist institutional investors to assess new risks and opportunities

Mercer, a global consulting leader in advancing health, wealth and career, today launches the 2019 Global Outlook and Themes & Opportunities papers. This work outlines the key themes and trends expected to influence economic and market dynamics in 2019. The investment themes that institutional investors should consider include the ‘white waters’ of the late cycle; winds of change in market participation; tectonic frictions in the global world order; and increased focus on sustainable investing.

“While the global economy performed well in 2018, headwinds in the latter half of the year – like rising interest rates, continued tension and uncertainty around global trade, weakening global growth and slowing equity markets – will continue into the New Year and beyond,” said Jean-Philippe Provost, Senior Partner and Leader of Mercer’s Wealth Business in Canada. “Managing investment portfolios in an environment this complex requires a steady hand and expertise. We look forward to helping investors find their way through these headwinds and helping insulate their assets from the turbulence roiling the global economy.”

The 2019 Global Outlook paper can be found here.

The 2019 Global Themes and Opportunities paper can be found here.

Highlights of the Themes & Opportunities paper

Chance of ‘White Water’ turbulence

  • The macroeconomic backdrop continues to be positive; pro-business policies and levels of business optimism continue to assist the equity market in the near term However, there is mounting evidence of overextension of credit. Outstanding debt is increasing, while quality is decreasing. Covenants are deteriorating and speculative use of debt is becoming more evident
  • When these contrasting equity and bond market currents meet, there is scope for ‘white water’ turbulence. Navigating such an environment will require investors to be alert, prepared and tenacious

Winds of change in market participation: Central banks retrench from market involvement

  • As central banks now try to rein in their market involvement, it is far from clear what the implications for liquidity will be, and the increased involvement of institutional investors in private markets affects both public and private investors.
  • A rise in the number of investment strategies that sit between traditional active management and traditional passive management is likely to benefit many investors not suited to either extreme.

Political fragmentation and trade tensions threaten globalisation

  • The 2018 theme of political fragmentation continues to be relevant into 2019 and is likely to be a prominent theme into the next decade. It is possible that the pace of globalisation may slow, pause or even go into reverse
  • Whilst more turbulence in global politics is likely to continue to weigh on markets, it may present a more favourable investment environment for certain types of opportunistic strategies

Increasing focus on sustainability

  • Governments, regulators and beneficiaries are increasingly expecting those with responsibility for allocating capital to take a broader perspective of risk and return; although there are strong regional differences in expectations
  • The incorporation of sustainability considerations into portfolios involves the need for a longer timeframe than that typically used for investment decision making. Investors who do take a longer term view may uncover opportunities that are not currently priced in

Mercer delivers advice and technology-driven solutions that help organizations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 22,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With more than 65,000 colleagues and annual revenue over $14 billion, through its market-leading companies including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit Follow Mercer on Twitter @MercerCanada