For 2019 the key issue was the progress of the US/China trade dispute.
Wall Street hit new highs as the tensions between the US and China eased. A limited agreement was struck to pause their trade war and ease pressures on the global economy as the new year begins. The ‘phase one’ deal sees billions of dollars in tariffs removed or delayed.
Fiscal policy is sympathetic: the US continues to run a large government deficit (4% of GDP), while China loosened its purse strings to offset the effects of tariffs on trade and domestic retail sales. In Europe, the trend towards higher deficits started in Italy is moving north, as evidenced by Dutch plans to cut taxes. Germany continues unaffected but is feeling pressure to recycle its savings into fiscal spending, particularly as it has technically been in recession.
In the UK, whilst Boris Johnson’s honeymoon period will end, we have increased the weighting in domestic UK as, for now, Brexit uncertainty has lifted. The UK market has some catching up to do, so valuations are, in places, attractive as the reality of negotiating a trade deal with the EU becomes real in the second half of 2020.
Despite anticipated lower returns and pockets of volatility, more investment opportunities are expected. Demographic change is set to help emerging markets and sectors such as healthcare.
New developments for the technology markets in areas such as artificial intelligence, genetic therapy and 5G are expected.
There are exciting investment and growth opportunities from the shift in consumer preference together with government regulation towards more sustainable products and services.
Overall, whilst markets will almost certainly be prone to buffeting as a result of geo-political uncertainty, we expect 2020 to be another good year for investment as the low interest rate climate persists. In addition, Trump is focused on stimulating the US economy and maintaining pressure on the Fed to keep interest rates low to aid a November election victory.
Please note, our Market Overview & Outlook is our view of markets and does not constitute investment advice. Past performance is not necessarily an indication of future returns; the value of investments and any income from them is not guaranteed and can fall as well as rise. Overseas investments are affected by currency movements and exchange rates. If you would like investment advice on your individual circumstances, please do not hesitate to get in touch.