At the beginning of every Chinese New Year, AsianInvestor makes 10 predictions about economic, political and financial developments that are likely to have an impact on the way institutional investors assign their money. And then, one year later, we revisit these forecasts to see how well we did.

Our fourth Year of the Dog forecast was to look at whether it was an opportune time to invest into European and UK equities, following the uncertainty around the upcoming Brexit. 

Are European and UK equities a good bet in 2018? 

Europe: yes - inaccurate

UK: no - accurate

The view among most equity strategists in early 2018 was pretty standard when it came to the two players on the Brexit divide: buy mainland European stocks and sell UK ones. 

As we noted a year ago, Mike Bell, global market strategist at JP Morgan Asset Management, had identified UK stocks as the least attractive across all global markets this year. This is despite the FTSE 100 gaining 7.1% and the Stoxx Europe 600 climbing 8.8% during 2017. 

Bell and many of his peers made a good call with regards to UK stocks as the FTSE 100 fared terribly in 2018, dropping 12.5% for its largest annual fall in 10 years.

Investors became increasingly skittish during the year as it became obvious that the Conservative government was time wasting in its negotiations with the European Union, with many extremist politicians advocating for a 'no deal' Brexit.

Added to this were lingering concerns about the ongoing US-China trade war, which left investors increasingly concerned about the future of the UK economy. 

When Prime Minister Theresa May finally came up with a deal in November it was a disaster that was derided by pro-Brexiteers and pro-Remain politicians alike, leaving stock markets even more concerned about the country's future. It was so bad that she delayed a vote on it. And when she did finally bring the deal to parliament on January 16 it was defeated by 230 votes – the largest parliamentary defeat ever handed to a government in a country, remember, with a parliamentary democracy stretching back centuries.

With news building in January of various companies looking to relocate their headquarters from the UK in January over fears of a no-deal Brexit, the signs still don't look good. 

But while UK stocks were a bad investment last year, so were European company shares. The Stoxx 600 fell 12.89% over the course of 2018, even more than in the UK. The EU was hit directly by some new tariffs from the US, while concerns over the new populist government in Italy, the weakening of the coalition government of Germany's Angela Merkel in two state elections plus mass violent protests in France all helped to undermine investor confidence in European investments.

The market performance of European bourses was also not helped by uncertainty over the European Central Bank's interest rate plans.

A notable example of this stock weakness was the poor performance of shares in Europe's largest economy. Germany's Dax index dropped about 20% during the year over fears of US-China trade tensions, which hurt its automakers. 

All in all 2018 was a poor year for equity investments in Europe, whether on the mainland or its increasingly isolated northwestern island member. 

Previous Year of the Dog reflections:

Will the US Treasury yield curve invert?

Will Donald Trump still be president at the end of 2018?

What will be the best performing mainstream asset class, on a risk-adjusted basis?