Stocks markets enjoyed record highs during the early months of 2018 with investors cheering a business friendly US government lead by Donald Trump and the rest of world benefited from easy monetary policy with low interest rates and QE.
This was turned on its head throughout the year, leaving shares a lot cheaper towards the end of 2018 than they did at the beginning.
The selection of stocks for 2019 will be a process dictated by both geopolitical considerations and the relative valuations of individuals equities and wider indices.
The nature of the political backdrop in major global economies drove investor allocations throughout 2018 and this top down approach to equity selection will be at the forefront of stock pickers strategies into 2019.
Brexit, Trump and rumblings from southern Europe are set to influence the allocation of capital between equity and fixed income as well as the picking of individual shares.
Brexit threatens not only the risk of sharp declines in shares in the case of a no deal but also the risk of missing out on any relief rally on a smooth transition that dispels the doom-mongers fears over the UK economy.
Those shares with significant exposure to the UK economy have had a risk premium built in their shares prices and now trade well below long term price-to-earnings ratios. This may well provide an opportunity for investors over the next 12 months.
On the other side of the pond, the Trump rally is all but dead but shares have fallen from all-time highs and could present opportunities for bargain hunters in the short term and long term value investors seeking out fairly priced growth companies.
While UK assets and economic activity have been depressed by ongoing Brexit negotiations and political uncertainty, Europe has managed to side step much of the fall out and is still providing the underlying growth to support share prices. Those shunning the over stretched valuations of the US and the political uncertainty of the UK may well be more comfortable with the relative economic stability of Europe.
No matter the geographical destination for your capital, one must be conscious of the stage of the market cycle we are in and consider selective stock picking is more important than ever.