News

The spread of coronavirus is a severe, but temporary exogenous shock to the economy that is being exacerbated in the short term by the drop in oil prices.

TURN FOR THE BETTER

If the US-China trade dispute does not escalate again, global growth should pick up slightly in 2020. However, political uncertainty will remain high.

LIMITED POTENTIAL

In the event of an economic upturn and a partial settlement in the trade dispute, equities should benefit initially from their relative attractiveness and investor inflows, despite the rally in 2019. Disappointments could emerge later in 2020.

SELECTIVITY AND

TACTICAL POSITIONING

A repeat of the strong performance of nearly all asset classes in 2019 is unlikely. Active management, selectivity and…

CONTAGION RISK

Unless the political uncertainties subside and manufacturing stabilises, the weakness of this sector could also dampen consumer spending. However, a deep recession remains improbable.

EQUITIES ARE ATTRACTIVE

Equities are supported by increasingly negative bond yields, cautious investor positioning, historically positive Q4 seasonality, and loose monetary policy. Bond yields appear to have seen their lows for now.

LIMITED OPTIMISM

We have begun to selectively build up riskier positions in our portfolio. However, we would need to see signs of an economic recovery before…

LATER RECOVERY

Heightened political uncertainty is weighing on sentiment and growth: a sustained economic recovery will be delayed at the very least.

LACK OF CATALYSTS

Equity markets have already priced in a stabilisation of growth and bond markets have already priced in several interest rate cuts by the Fed.

SUMMER WEAKNESS

Without a breakthrough in the trade dispute, anything more than a volatile sideways movement for equities over the summer seems improbable.

STABILISATION

If key political risks subside further, we would expect economic data to stabilise in the course of the second quarter.

OVERREACTION

Markets are already betting the Fed will lower interest rates in 2020. But only one of two things can happen: either an economic recovery or an interest rate cut.

SUPPORT

The fact that investors are not positioned aggressively creates tailwinds for riskier assets at first (assuming that economic data stabilise) – but summer weakness looms on the horizon.