After the market turmoil seen this year, an investment manager who oversees $64 billion for BNY Mellon is bracing for an even worse 2019, Business Insider reports. How bad has 2018 been? Deutsche Bank calculates that, through mid-November, this year has registered "the highest share of global assets with negative returns since 1901," as the article puts it. Indeed, cash has beaten a vast array of investments so far in 2018, per an earlier Investopedia article.

Suzanne Hutchins, the London-based global investment manager at $64 billion Newton Investment Management, a thematic investment boutique owned by BNY Mellon, told Business Insider: "I would describe next year as the Queen described it--as a year of annus horribilis [i.e., horrible year]. It's going to be very challenging moving into next year because we're at the cusp of many turning points." She's shifting to a capital preservation strategy designed to limit losses in 2019, and offers these recommendations to investors:

  • Buy low debt companies that grow despite what the broad economy is doing
  • Buy cheap, non-FAANG tech companies that are growing and cash rich
  • Hold some gold as a hedge, perhaps through an ETF
  • Consider U.S. Treasury Bonds, as well as Australia and New Zealand bonds

Significance for Investors

Hutchins also expects that the level of volatility that the market experienced in February of this year will be typical in 2019. Her reference to annus horribilis (horrible year) recalls a November 1992 speech by Queen Elizabeth II that recounted a number of unfortunate events for the British royal family in that year.

Companies with low debt and stable growth are among the sorts of "quality companies" that Goldman Sachs has been recommending, as detailed in a recent Investopedia article. The best places to shop for growing companies with low debt, Hutchins says, include health care and pharmaceutical firms, plus "some areas of technology."

She is avoiding the FAANG stocks since their valuations are "very rich." However, she offers computer networking equipment leader Cisco Systems Inc. (CSCO) as an example of a tech company that isn't flashy, but is growing. Cisco also had $8.4 billion of cash as of its fiscal quarter that ended in October.

"Some gold in your portfolio is always a good hedge," Hutchins says, and recommends it as protection against unanticipated geopolitical shocks. She suggests bonds for diversification, and observes that U.S. T-Bonds are "very, very attractive to non-U.S. investors." Also, while Australia and New Zealand bonds may not have immediate appeal for U.S. investors, she expects them to "do quite well" if China's economy slows.

Looking Ahead

If a broad-based decline across asset classes continues, there may be no safe harbor for investors, as a New York Times article suggests. Indeed, the reversal of quantitative easing (QE) by central banks around the world, including the U.S. Federal Reserve, is removing a significant prop from asset prices, apart from other economic forces. Meanwhile, for those looking to the really long term, Hutchins believes that green, sustainable and renewable energy will be a major growth area.