Geopolitics will continue to occupy investors' minds this year with trade wars, the U.K.'s exit from the European Union and a number of political elections on the shortlist of concerns.
Despite reports that the U.S. and China had agreed to a 90-day hiatus in their so-called trade wars late last year, money management executives still expect the issue to rumble on and impact global markets, with increased volatility and uncertainty.
"The U.S.-China truce will probably offer only a temporary respite, while the outcome of negotiation is highly uncertain," said Silvia Dall'Angelo, senior economist at Hermes Investment Management in London. "Indeed, there are several reasons for caution: the only aspect the two leaders agreed on is a truce, 90 days is a very short time window to reach a trade deal (and) the respective starting points are quite far apart."
Even if a deal is reached soon, "it will probably be a fragile and temporary fix rather than a comprehensive solution to structural issues. Fundamental tensions between the two countries are likely to continue to brew," she said.
Added Joseph V. Amato, president and chief investment officer — equity at Neuberger Berman Group LLC in New York: "You might have short-term resolutions of small issues — if this were just about how many soybeans the Chinese were buying, this would have been resolved a long time ago. It is about fundamental, existential things for the Chinese economy. No matter how hard the U.S. wants to fight, some will be difficult to resolve. It's really an issue of transformational change in trade vs. transactional change — the Chinese want transactional change, U.S. wants transformational change and that's just very hard — systems are different, and (the) Chinese system seems to have worked very well for them."
However, Mr. Amato warned that China cannot be the second-largest economy in the world "and be a significantly protectionist country — you can't be first or biggest and have a protectionist system. All of your trading partners will rise up against you."
It's something Neuberger's executives will watch "very closely."