Learn more about market trends Investment Outlook 2020. Resilience after all.
Unforeseen and surprising events have shaped 2019, and we have little doubt that they will impact the world in 2020 as well. In light of such uncertainty, it is of utmost importance for investors to build resilient portfolios.
Even if the US-China trade war eases and Brexit uncertainty diminishes, the year 2020 is unlikely to be entirely smooth sailing: 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 sporadically test investor nerves.
Overall, however, we believe that the global economy and risk assets will continue to show considerable resilience in the face of these challenges. This is the message that the title of this year’s publication, Resilience after all, is intended to capture.
A recession is unlikely in light of ongoing monetary policy support, ample credit, some fiscal easing and low oil prices.
While we expect rather subdued economic growth in 2020 and returns that are generally lower than in 2019, a serious market downturn or even financial crisis seems unlikely to us. We observe a number of imbalances in various economies and sectors, but none of them seems serious enough to trigger such a crisis. Conversely, technological progress remains in full force and, importantly, policy makers will continue to provide support.
Credit Suisse House View in short
Global economy: EMEA
Coping with setbacks
Growth: Turkey appears to have emerged from recession in Q2 2019 and is likely to achieve growth of 2%–3% in 2020. The headline inflation rate, projected at 12% for end-2019, could slow further after Q1 2020. Growth in Russia is likely to remain anemic at only around 1%–2% due to unfavorable demographics, bureaucratic burdens and low efficiency of public investment. Weak metals prices as well as structural issues such as labor market rigidities and a lack of public investment will continue to hold back South Africa. A number of Eastern European economies have suffered setbacks due to their close ties with the German auto industry, but growth is likely to remain reasonably robust given strong domestic demand and these countries’ strong competitive position in other areas of trade.
What to watch: In Turkey, policy mismanagement remains the key risk against the backdrop of President Recep Tayyip Erdogan’s target for single-digit interest rates and real GDP growth of 5% next year. The changing domestic political landscape and ongoing (albeit muted) geopolitical risks also complicate the outlook, in our view. In Russia, low inflation (for the previously mentioned reasons) should pave the way for lower interest rates. A pick-up in Germany would benefit Eastern Europe. There are significant downside inflation risks building in South Africa. If they come to pass, South Africa will probably be one of a very few countries with large potential for policy easing in 2020. Investors will also be closely watching to see if Moody’s downgrades its rating for South Africa after the 2020 budget.
Investment Outlook 2020.
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Resilience after all.
Our Investment Outlook lays out the key elements of the Credit Suisse House View for 2020. We have strived to provide a consistent and well-structured guide across the most important asset classes, markets and sub-segments. It suggests that investors who hold well-diversified portfolios, tilted toward areas of extra return, should continue to garner healthy returns. Furthermore, sustainability is increasingly relevant for investors, as it has already become a matter of great importance for voters and consumers around the world.