Despite slowing global growth, central bank policy tightening and escalating geo-political risk, for most of last year markets advanced higher. However, looking ahead into 2019 can they continue to climb the wall of worry?

2019 may well be another difficult year. While partial relief arrived in the first few weeks of the new year, volatility remains elevated, a cautious attitude to risk is needed, and portfolio diversification (as always) will be key. The sharper-than-expected slowing in global growth as 2018 drew to a close, and the lagged nature of economic data, suggest the next few months are likely to provide little further relief. Data on trade and activity are likely to be disappointing across both advanced and emerging economies.

Key will be the extent to which central banks' withdrawal from further tightening (as well as renewed China stimulus) can elongate the later stages of this macro cycle, both drivers behind our recent return to a more neutral risk stance. Assuming some calming in global geo-political tensions, H2 2019 may prove a better backdrop for moderate equity gains. For Australia, transitioning a mid-year federal election may also provide a better backdrop.

This month, we canvass the issues weighing most on markets and flag our updated set of 'risk signals' that we will be monitoring through the year. We also highlight our recent tactical shift to move more overweight international versus domestic equities. In particular, we add further to our overweight emerging market equity position (held since September last year) and move back to neutral in the UK (from underweight) and Europe (from overweight).