For the US though, the trade war with China and higher import tariffs are likely to result in inflation remaining elevated for the majority of next year.
In spite of this, Mr Wade expects that the Federal Reserve will “look through above-target inflation in 2019 and pause to take account of the effects of slower growth on future price rises”, having increased interest rates a further three times to a peak of 3 per cent by June 2019.
Trade wars
There are, of course, additional headwinds that could have a negative effect on the global economy in 2019, most notably when it comes to trade agreements.
The UK and Europe are at loggerheads over Brexit, and the US and China have locked horns over imports and exports, both of which have contributed to one of the worst year-ends for global investors in recent history.
Hussein Sayed, chief market strategist at FXTM, highlights: “The S&P 500 has fallen 4.6 per cent from the beginning of the month [December], and if it remains at current levels until year’s end it will mark the worst performing December since 2003.
“Neither the dovish statements we heard from the Federal Reserve’s policy makers nor the trade truce between US President Donald Trump and his Chinese counterpart Xi Jinping provided signs of relief to the financial markets.”
A year of resolution?
For Andrew Jackson, head of fixed income at Hermes Investment Management, protectionism is the main risk clouding the growth outlook.
He explains: “China’s share of international trade now exceeds that of the US, making trade tensions between the two countries inevitable and a geopolitical risk going forward.
"The macro impact of measures announced so far is marginal, but a broad-based retaliation would have vicious consequences.”
As the door closes on yet another volatile year, Simon Gergel, portfolio manager of Merchants investment trust, suggests that in spite of interest rate, inflation and trade pressures, 2019 “promises to be a year of resolution” – for the UK at least.
He concludes: “The fog should gradually lift on what Brexit will actually mean for the UK as well as who will be leading the country.
"An end to uncertainty could release pent-up demand in the economy and could herald a return of foreign buying of UK equities, and a revaluation of the stock market from depressed levels.”
