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: Latin America
Growth: Brazil and Mexico, the region’s two largest economies, showed only marginally positive growth in 2019. This was in part due to the global manufacturing slowdown, but domestic policy uncertainty played an even bigger role. The outlook for Brazil has improved, however, with the approval of pension reform, which will strengthen long-term fiscal stability and should be positive for privatizations and a continuation of the fiscal consolidation process. We expect GDP growth of 2.7% in 2020. In Mexico, growth should also improve somewhat (1.6% in 2020), partly in response to monetary policy easing. Meanwhile, some domestic risks have abated, including uncertainty over the 2020 budget and financing pressures on state-owned oil company Pemex. That said, it is questionable whether added government investment in the oil sector will produce adequate returns given declining global oil prices.
What to watch: In Mexico, other reforms such as tax reform look more likely despite political tensions. In addition, US congressional approval of the new free trade agreement known as the United States-Mexico-Canada Agreement (USMCA) would boost confidence, but this is not a given. Inflation in Mexico has declined to the central bank’s 3% target, and should remain fairly stable at below 4% in Brazil.
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.