2019 outlook: war, inflation, recession?

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The Big Picture 

In considering the outlook for 2019 we take a step back and analyse the long-term backdrop. This reaffirms an ongoing preference for equity-like assets despite diminished long-term growth potential. Events that typically cause a divergence from that path are: war, inflation and/or recession. Though all are possible during 2019 (we assign a 25% probability to recession), our central scenario remains one of modest global growth and inflation. This leaves us expecting better returns on equity-like assets but we examine alternative scenarios.