Welcome to “Outlook 2020”, our annual investment outlook update from Barclays Private Bank (which you can also download as a PDF).
It’s been a tumultuous year for financial markets in 2019, with geopolitical uncertainties heavily affecting sentiment. That said, the year has seen strong returns across major asset classes.
So what does 2020 have in store? Outlook 2020 shares our thoughts on likely key drivers of financial markets and appropriate investment strategies.
With Brexit unfinished and a US presidential election in November, 2020 is set to see geopolitical uncertainty climax. The end result of these two events will likely affect financial markets for the foreseeable future. While their outcome is highly unpredictable, the path to each should trigger renewed volatility.
Turning to the economy, elevated levels of uncertainty are likely to delay much investment, again, but the risks of a global recession are contained. Indeed, the private sector, and particularly households, still enjoys favourable conditions such as multi-decade lows in the unemployment rate.
Despite a further slowdown in Chinese growth, expansion in emerging markets should slightly accelerate overall, helped by a rebound in places like Brazil, Russia or Turkey.
While a recession should be averted, global growth remains fragile and valuations look stretched across all asset classes. With muted price returns likely, we prefer strategies providing yields to enhance total returns. And with uncertainty rising, tactical hedging and diversifying portfolios with private assets, market neutral strategies or gold seem appropriate.
Finally, with climate change rising up the political and corporate agenda, we examine the investment risks of climate change and how investors can respond to them. Indeed, with more fiscal spending on the cards, this is likely to be tilted, at least in part, to tackling this issue. In a year when uncertainty should reach new highs, climate change is a certainty that deserves all our attention.
Jean-Damien Marie and Andre Portelli
Co-heads of investments, Private Bank
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