2020 Outlook

Abnormality to Continue

Its been 11 years the global economy has been recovering and this is not normal due to the US Fed hesitating to raise interest rates. Europe and Japanese Interest rates remain negative with most of the developed countries sailing in the sub-zero nominal yields. In contrast to the past, governments have managed to cut interest rates and implement policies that will support growth in the coming year.

Race for the white house

A Trump vs Warren is a most likely head to head show down. A Democratic win will see a shift towards redistribution and anti-big business stance that is very familiar with the republicans. Warren has already proposed tax measure on the wealthy.

US- China Dispute

China’s slowing growth has hit headlines in 2019 however they have arrived at a more sustainable level. The attempt by America to check the rise of china looks to be having the opposite effect and should push Trump to call truce. China, once known as the nation that replicates everything is becoming a leader in the tech sector. The large rural economy is catching up to digital integration which is raising incomes and spending power of the huge population.

Source: CEIC, Morgan Stanley Research, Joseph Loman as at October 2019

Markets:

Bond Markets:

As Central banks around the world look to keep the short-term interest rates low, yield curves look to go south even more. Local governments are also issuing out more bonds and this will put upward pressure on real interest rates.

Equities:

2020 could possibly be the year that US equities dominate primarily due to US earnings per share growth driven by the strength of the US economy.

Emerging Markets:

Research from Bloomberg has reported that the emerging markets have added a whopping $11 trillion into investors portfolios over the past decade. A survey done by Bloomberg and 57 investors (Lazard Asset Management, Fidelity, Bank of Singapore etc) showed that emerging markets will outperform developed markets in all asset classes.

A softer US dollar:

The US dollar may switch from a position of strength it has sustained for a long period. The US still has positive interest rates and monetary policy can still

work in America. We concur with market sentiment of a peak in early 2020 but it will slightly get weaker.

Australian Dollar:

The Australian dollar is good absorber for the Australian economy. If the international market grows, we think it will rise a little in 2020.

Gold: Defensive?

With bonds likely to underperform because of lower yields, gold stands as a strong contender to fulfil a defensive role in portfolios. Gold reached its six year high in 2019 due to uncertainty in the market. Gold stocks may be a good complement to physical gold exposure in investor’s portfolio.

In conclusion the outlook is airing a positive sentiment of global growth and stability in 2020.

This material is for information/educational purposes only. It does not provide individually tailored financial advice.