Investment outlook

Invesco Fixed Income - 2020 outlook

2 December 2019
Rob Waldner
Rob Waldner
Chief Strategist and Head of Macro Research
Invesco Fixed Income – 2020 outlook
Despite uncertainties, fundamentals to remain solid.
Key takeaways
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Despite the rally in credit-related assets in 2019, we enter 2020 with a positive backdrop for investment grade bonds.
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In our view, strong market technicals, coupled with favorable demographic trends, mean high yield bonds will likely remain attractive in 2020.
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Chinese growth has shown signs of slowing, but we believe the credit metrics of Chinese issuers will remain largely resilient and corporate default risk will remain low.

As one year comes to an end, another one duly follows, and at Invesco Fixed Income we believe fundamentals will remain solid across global fixed income markets in the coming year.

We believe global growth will exceed current market expectations and the growth slowdown in Europe and China may have troughed and US growth, while weak, has been supported by central bank policy. We expect the US to return to its level of potential growth at around 2% at some point in 2020.

Other risks that have hindered markets during 2019 appear to be receding. Trade tensions have eased, and near-term tariff increases may be delayed. Stabilization of growth conditions, reduced trade tensions and easier monetary policy will likely lead to positive growth surprises. China and Europe will likely lead the recovery with the US lagging somewhat. Overall, we believe markets have not priced in an upswing in global growth and, on the contrary, currently imply the possibility of a US recession.

In our view, Inflation in the US and Europe is likely to remain low, especially excluding the impact of tariffs. Tariffs may cause some near-term upside surprises in US inflation, but we believe they would be temporary and should be discounted. Chinese inflation is higher than policy makers would like due to idiosyncratic and exogenous factors but is still within their acceptable range.

Global monetary policymakers have eased significantly in second half of 2019. The Federal Reserve (Fed) has cut interest rates three times since July 2019 and may potentially ease further if data continue to weaken. It has also begun increasing the size of its balance sheet for technical reasons to support the short-term funding market. The European Central Bank (ECB) is also loosening its monetary policy and has resumed its quantitative easing (QE) programme. Lastly, China has eased fiscal policy, but monetary stimulus has been more restrained.

For more in-depth sector and regional analysis, please read Invesco Fixed Income’s 2020 outlook.

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Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

Important information

  • Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

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