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Credit Suisse Investment Outlook 2020: Resilience after all

Global economy and risk assets expected to continue to show resilience despite headwinds


Investors are likely to have to contend with many unforeseen events and market swings in 2020, but the global economy and risk assets should prove resilient, according to the Credit Suisse Investment Outlook 2020. Credit Suisse economists forecast that the global economy will grow at a moderate rate of 2.5% in 2020, and they believe that a recession is unlikely. Amid this softer pace of growth, Credit Suisse expects modest single-digit returns in the key equity markets.

A polarized US presidential campaign, margin pressure, high corporate debt, and fewer interest rate cuts by the major central banks – not to mention unexpected political developments – are likely to test investor nerves in 2020. Even if the US-China trade war eases and Brexit uncertainty diminishes, investing throughout 2020 will require prudent portfolio diversification tilted towards areas of extra return.

Nannette Hechler-Fayd’herbe, Chief Investment Officer International Wealth Management and Global Head of Economics & Research at Credit Suisse, stated: “We expect moderate economic growth, liquidity conditions to remain accommodative and geopolitical tensions to ease. As the US-China trade war subsides, business sentiment should improve, lifting growth-oriented sectors and stocks.”

Outlook for the major economies and currencies

  • United States. Credit Suisse expects slower GDP growth for the US economy in 2020 at 1.8%, accompanied by rising core inflation. The USD should remain supported but weaken in the course of the year as its interest rate advantage over most G10 currencies wanes. 
  • Eurozone. Monetary policy is unlikely to ease further, but resilient credit growth should support ongoing economic expansion, with GDP growth forecast at 1%. Fiscal stimulus and diminishing Brexit uncertainty should support the EUR.
  • Switzerland. In light of the modest global economic backdrop, Swiss GDP growth is forecast at 1.4%. If the Eurozone economy improves, the overvalued CHF could lose ground against the EUR.
  • China. The government is likely to set a GDP growth target of 5.9%, slower than in 2019. Unless the US-China trade conflict escalates, which is not our base case, Chinese authorities are likely to limit any depreciation of the CNY.
  • Japan. The 2020 Summer Olympics will provide a tailwind and boost the Japanese economy in the first half of the year. Overall, GDP growth is likely to slow to 0.4% but the expected turn in global manufacturing should limit the slowdown. The JPY should be supported by its undervaluation against the USD.  

Outlook for financial markets

  • Equities continue to offer an attractive return advantage over low-yielding bonds. On a sector level, IT is preferred as one of the few high-growth sectors. Financials are also attractive, as the expected improvement in the cyclical outlook will likely trigger a further rotation into that sector in the first half of 2020.
  • In fixed income, returns on many of the highest quality bonds will very likely be negative in 2020 and beyond. However, a number of intermediate quality segments are expected to deliver reasonable returns. Most emerging market hard currency debt should also achieve solid returns.
  • Commodities have been on diverging paths this past year, with the industrial production slowdown weighing on cyclical commodities in particular. Going forward, this divergence is expected to diminish. While gold prices are likely to consolidate, oil prices may face a period of weakness before recovering eventually.
  • In alternative investments, most real estate investments should continue to deliver moderately positive returns. Direct real estate is favored, as lower interest rates do not yet appear to be fully reflected in the price.

Michael Strobaek, Global Chief Investment Officer at Credit Suisse, said: “In an environment of lower-for-longer yields, a multi-asset framework allows investors to take advantage of pockets of value in low-risk markets, while increasing expected returns by investing in equities and seeking out less conventional fixed-income investments. We believe such an approach will prove rewarding in 2020.”

Download the Credit Suisse Investment Outlook 2020 here.