Uncertainty on how U.S. and Chinese policies will affect trade, Italy’s budget standoff with the European Commission, worry over Brexit and the U.S. Federal Reserve’s monetary policy all imply volatility for the coming year, according to Russell Investment Canada Ltd.’s 2019 market outlook.

The firm is remaining neutral on equities and underweight U.S. stock, though it’s maintaining a more positive view on other developed markets. It’s also staying neutral on emerging market equities because of worries over current trade tensions. If investors were to turn sour on emerging market plays, it could be reason enough to capture even cheaper opportunities, according to the firm.

Read: How are trade jitters, geopolitical risk affecting equities?

In its outlook for fixed income, it noted British, German and Japanese bonds are expensive heading into the new year. As well, as inflation pressures build and central banks move towards tighter policies on a global scale, there are natural, cyclical headwinds for bonds. For the U.S., Russell’s models provide a fair-value yield of 2.7 per cent for a 10-year bond.

Russell’s preferred currency for the upcoming year is the Japanese yen, which it finds significantly undervalued. The British pound will likely be more volatile as Brexit continues to play out, but overall economic conditions in Europe support the view that the euro is also undervalued, with more upside potential than the pound. The outlook also expects the U.S. dollar to have some upside potential for the coming year.

Read: Revisiting the case for investing in emerging market equities