Economic and Strategy Viewpoint - January 2020

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Jan 16, 2020
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2019 review: liquidity driven rally

  • We look back at a year full of challenges for investors as trade wars flared up again, the UK was beleaguered by Brexit, while unrest and protests elsewhere in the world kept investors on their toes.
  • Following the disastrous end to 2018, almost all asset classes got off to a strong start in 2019. Top quintile total returns were achieved for both equities and bonds, which was helped by central banks loosening monetary policy.

Strategy note 2020: reality bites?

  • Investors were able to ignore the weakness of corporate earnings in 2019 as markets re-rated following the easing of monetary policy by the US Federal Reserve and other central banks.
  • As we head into 2020, the profits outlook remains difficult given margin pressures. Moreover, equity markets already appear to be pricing in an economic rebound. In the absence of a significant liquidity impulse and further re-rating, returns are likely to be constrained to single digits.
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