Equities Identifying sustainable growth businesses in emerging markets
This year has been unique in many ways. Will 2021 be any different? Read more.
Central bank accommodation should bode well for 2020, as the rate cuts enacted by the US Federal Reserve in 2019 have already resulted in an acceleration in money and credit growth.
However, we believe such monetary easing should be more positively impactful for asset prices than the overall economy.
As we look ahead to 2020, it’s clear that central banks are still shouldering the burden for stimulating the economy via monetary policy, as has been the case since the Global Financial Crisis.
After a nascent attempt at normalizing, some major central banks have become more accommodative as 2019 has progressed. That should bode well for 2020, as the rate cuts enacted by the US Federal Reserve (Fed) in 2019 have already resulted in an acceleration in money and credit growth. However, we believe such monetary easing should be more positively impactful for asset prices than the overall economy. We do believe more fiscal stimulus is needed — although most governments are reluctant to provide it.
We note that there are longer-term implications to an overreliance on monetary policy, but that is unlikely to be an issue in the coming year. Countering the positive effects of monetary stimulus is geopolitical disruption — and the economic policy uncertainty that comes with it. Sources of policy uncertainty include:
Economic uncertainty is likely to continue to depress capital spending, in our view, and we must watch vigilantly to ensure it doesn’t spill over into diminished hiring plans.
The dichotomy between the manufacturing and service sectors of the economy continues, as we expect manufacturing to continue to experience weakness largely due to the trade wars. However, those economies with less exposure to manufacturing are likely to fare better in this environment, in our view.
Download the paper to read our outlook for the U.S, Eurozone, U.K, Japan, China and Emerging Markets
Read Kristina Hooper’s 2020 outlook
This year has been unique in many ways. Will 2021 be any different? Read more.
2020 promises to be a challenging environment, but Ian Hargreaves and William Lam believe Asia and emerging markets can offer opportunities.
Our investment teams from around the globe outline their expectations for 2020 to help investors plan for the coming year, wherever the markets take us.