What is the global market outlook for 2019?

The upward drift in inflation was gradual, so there were not many surprises from the Federal Reserve, which hiked rates in line with its guidance.

Fear and indiscriminate selling often reveal ample opportunities for long-term investors

What proved considerably more disruptive throughout the year were the foreign policy initiatives that emerged from Washington.

Undeterred by the threat of higher costs for US consumers and businesses, trade tensions escalated. It seems there is considerable political appetite amongst the US electorate, and across both the Republicans and Democrats, to reconsider US trading relationships, with China very much at the eye of the storm.

This trade aggression hit the Chinese economy at a point when growth was already slowing rapidly in response to tighter policy from Beijing.

Europe has been caught in the crossfire. Although early tensions between the US and EU over auto tariffs have dissipated for now, European demand has been battered by a downturn in global trade.

Strong growth in the US economy did not therefore trickle elsewhere as it has tended to in the past.

As we look ahead to 2019 we believe significant US economic outperformance is unlikely to persist. Indeed US GDP growth is expected to moderate to less than 2 per cent by the end of 2019.

The tax cuts could have generated more lasting effects through increased business investment. But in the face of such geopolitical uncertainty companies are now deferring investment.

This has been most stark in Europe and Asia, but there is increasing evidence that capital expenditure intentions are fading within the US itself.

This is particularly disappointing because the global economy desperately needs stronger investment to revive potential growth, lift productivity, increase real wages and in turn ease many of the political challenges.

One potential solace for markets will come from the Fed. The recent decline in the oil price, alongside the strength of the dollar in 2018, is likely to mean headline inflation remains close to the 2 per cent target. We expect the Fed funds rate to edge closer to 3 per cent by mid-year.

In contrast to fading fiscal stimulus in the US, Beijing’s policymakers have put their foot firmly back on to the accelerator to see off the impact of slowing exports.

The Chinese authorities face a difficult balancing act of maintaining the ‘quality over quantity’ agenda, reducing excesses and leverage in pockets of the economy, but maintaining a sufficient level of growth to support employment. Easing measures will be targeted and of a smaller scale than in 2008, but we expect growth to remain supported in the region of 6 per cent.

Stable growth in China will likely support neighbouring Asian countries, but elsewhere in emerging markets, growth and earnings are likely to continue moderating in reaction to the tighter policies that were deployed in 2018 to defend currencies.

In the near term, markets in the UK and Europe are likely to remain plagued by geopolitical uncertainty. At the time of writing there remains considerable uncertainty about whether the UK prime minister will be able to pass Brexit legislation through parliament.

The EU faces critical European Parliamentary elections in May, while frictions between Brussels and Rome look set to continue. Nevertheless, our core expectation is that Europe will continue to muddle through, and expectations for the performance of European assets are already very low.

In summary, 2019 is likely to be marked by plenty of headlines around market volatility, which may deter savers from putting aside adequate funds for retirement.

We should focus conversations today on the strategies required to deliver returns at this advanced stage of the economic cycle and the opportunities that may present themselves in choppier markets.

Seeking to rebalance a portfolio, thereby locking in some of the equity gains made in the 10-year bull market and adding global fixed income or macro funds can improve the resilience of a portfolio.

And we should remember that fear and indiscriminate selling often reveal ample opportunities for long-term investors. This is a time to make sure you have powder dry and then to be excited – not to panic.

Karen Ward is chief market strategist for EMEA at JPMorgan Asset Management