Firstly, 2018 was a difficult one for investors with a fall 6.9% (in price) for the ASX 200.

With the first three and last four months of the year seeing negative monthly performances, it was a tough year. It was also a year that highlighted the difference timing could make. If you take out the negative months and focus on April to August 2018, the ASX 200 was up 10%.

The bigger question is whether the sell off is over or does it spill over into 2019?

On a macro level, global growth looks to be slowing and domestic risks are rising

When looking at a slowdown in growth, the general rule of thumb is to sell before a recession and buy six months into a recession or a slow down. Looking at recent slow downs in 2015 and 2011, the correction in the market lasted two quarters. Given past experience, investors should start to re-evaluate and look for opportunities after the 1st quarter of 2019.

Key events and risks

Domestic conditions are deteriorating. In Australia we’ve seen seven months’ decline in new vehicle sales, residential property weakness and money supply growth at a 26 year low. For the time being, stay away from domestic exposure especially residential housing and retail and remain cautious long term on banks.

What sectors are likely to outperform?

The time to look at buying agricultural stocks is when bad times, such as a drought, hit. Early 2019 is the time to take another look at being overweight agricultural stocks such as NUF and as evidenced by takeover activity and interest in GNC. At the start of the year, continue to focus on defensive sectors such as utilities and property. In property tend towards trusts exposed to Sydney office property.

My 7 favourite stocks

  1. Counter-cyclical: NUF (Nufarm), BSL (Bluescope)
  2. Income: CGF (Challenger)
  3. Defensive: AGL, DXS (Dexus)
  4. Growth: CSL, APT (Afterpay)