Investors are likely to remember 2018 as the end of the era of easy money, low volatility and steady margin expansion. Investing will be more challenging in 2019—and diversification will be more important than ever.

Among the challenges? Volatility, slower growth, less liquidity and more policy risk. When stocks sold off globally in late 2018, investment-grade and high-yield bond spreads widened, too. That’s something that didn’t happen during a similar surge in equity volatility earlier in the year. This is one of the developments that suggests to us that the current risk spike is about fundamentals and may be more severe and last longer than past ones.

In our view, this doesn’t mean disaster ahead. This is a transition from an unusually supportive environment to one that’s less so. That’s typical when the global economy is late in the cycle, and investors need to understand this new reality thoroughly to make portfolio decisions. Here are a few of the trends we’re watching closely.

Peak Earnings, Slower Capital Investment

Market multiples contracted quite a bit during the late 2018 selloff. And at this late stage of the cycle, rates aren’t likely to decline much unless growth concerns become more acute. Therefore, we are not expecting market multiples to recover much. That means earnings growth will be critically important for equity returns. But earnings expansion depends heavily on continued growth in business investment, and we expect that to slow.

Business investment has been a key driver of the market’s growth expectations. As the left side of the following Display shows, capital expenditure accounted for nearly a third of gross domestic product (GDP) growth in the US in 2018. This helps explain why economic growth rebounded from its 2016 trough.

But the spending we saw over the last two years was most pronounced in the US. When we take the US out of the capex equation, estimates show it likely slipped from 6.6% to 6.0%. Even in the US, business investment was frontloaded in 2018 and began losing momentum in the second half.