Our chief economist Steven Bell assesses the prospects for economies and markets in 2020.
After such fantastic returns from equities and bonds in 2019 and a 10-year bull market, it makes sense to ask: should we take those chips off the table, de-risk and bank the profits?
To answer this question, I am going to look at the prospects for the world economy and the fundamentals of equity markets and interest rates. Let’s start with the question of recession.
When I wrote last year’s Opening Bell, the fears of recession were very evident but they have now receded. The inverted yield curve sparked much of the excitement, and the Federal Reserve (Fed) responded by pivoting: abandoning their tightening path and cutting rates. Other central banks followed the Fed’s lead and this rapid reaction eased financial conditions and helped to boost the world’s financial markets. For some countries, this could have helped avoid recession.
The value of investments and any income derived from them can go down as well as up as a result of market or currency movements and investors may not get back the original amount invested.