Vantage Point - Outlook 2019: Navigating Fearful Markets

Welcome to BNY Mellon Investment Management’s
new quarterly Economics and Investment Outlook. In
this document we take the reader from international macroeconomic analysis, through capital markets and asset pricing into broad investment conclusions. We start with a central forecast for the world economy over the next 2 years but, because good portfolio design must take uncertainty and the balance of risks into account, we also describe some key risk scenarios and attach probabilities to them. We combine economic modelling with subjective judgement to generate forecasts for key asset prices in each scenario. The breadth of outcomes across scenarios gives us a measure of uncertainty, while the difference between the central forecast and the (probability-weighted) mean outcome tells us about the balance of risks, or skew. We present the results for economies and markets in the form of ‘fan charts’ and compare our forecasts with what is priced into markets. This informs our broad investment recommendations.