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First Half 2019 Market Outlook. What were the top sectors to invest in?

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Taking the uncertainty which prevailed on the global markets into account, the most common investment objective during the first half of the year has been capital preservation rather than capital growth.

As in the case with the Russian investors, one of the most common ways of dealing with such uncertainty has been shifting the capital into foreign, more stable currencies. Distribution of funds among several currencies appears to be the optimal method of risk reduction since simultaneous devaluation of exchange rates of several currencies is less likely to occur than that of a single currency. The most demanded currencies on the foreign exchange market currently are US dollar and Euro, while the demand for British pound has recently declined due to the political instability within the UK.

Along with foreign currency deposits, real estate also remains a popular investment choice among the Russian investors. Despite historically being a stable investment, real estate, however, has its disadvantages such as high capital requirement for the acquisition, ongoing expenses as well generally being an illiquid asset, which, unlike stocks, in most cases cannot be quickly converted to cash in case of emergency.

Among various real estate markets, the most significant increase in prices over the past six months were captured in Portugal, Austria and the Netherlands. Real estate market in Greece has also shown some signs of recovery. Increase in demand for the property in Portugal can be explained by the relatively low investment threshold in order to receive a residency permit – minimum investment amount of €500,000 for the purchase of real estate and €350,000 for the purchase of real estate for refurbishing. A significant share of the foreign buyers of residential real estate in Portugal are Chinese nationals.

Emerging markets such as Romania and Poland have seen an increase in commercial property prices. Moreover, upsurge of commercial property prices has been recorded in Amsterdam and due to the fact that many London-based companies are planning on leaving the UK Frankfurt in anticipation of Brexit, which could potentially make the business environment in the UK less favorable.

In times of economic uncertainty and instability, gold has always been a popular safe-haven, since its price tends to increase in response to the events that cause the decline of value of the investment securities such as equities and fixed income instruments. For this exact reason, investing in gold and gold mining is a reliable long-term investment. Moreover, investing in precious metals that are used for the production of jewellery, electronic and medical devices, is also worth considering as an investor’s security blanket.

When it comes to the investors with a higher risk appetite whose primary target is growth of capital, some have embraced the strategy of placing portions of their portfolios into alternative asset classes, such as private equities and venture capital. When compared with the figures from the previous year, the number of deals made within the venture capital industry has declined, although the overall investment amount has increased with the most active industries being healthcare, internet and software services and AI (Artificial Intelligence).

All in all, decline in consumption along with the trade wars and lowering interest rates, may be a signal of an impending economic recession. There is a variety of strategies that can be implemented in order to protect the capital, one of the most popular strategies, especially among the beginners, being index funds – a low-cost way of gaining exposure to a large number of securities. Another low-risk investment that has allows the investors to potentially achieve almost full capital as well as accelerated returns during the rising markets are structured products.

In conclusion, the golden rules that any investor should follow are taking care of portfolio diversification and refraining from making investments that one does not fully understand.

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