Our 10 key convictions for 2020 in three minutes
Discover here our 10 key convictions for 2020
We expect a gradual and moderate recovery. Underlying economic trends are improving, political tensions are easing and policies are accommodative. This environment will put some upward pressure on bond yields.
Given the decline in yields to historically low levels, investors need to expand their horizon. The search for yield leads to areas such as structured products, subordinated debt, buy-write strategies or to stocks offering high, safe and growing dividends.
Foreign exchange markets will see more of the same in 2020. 2019 was a year in which price fluctuations were limited. For example, between the euro and the dollar the fluctuation range was the lowest since 1975 at least. We see no reason for this situation to change.
Equities will continue to deliver positive returns. Beyond a phase of consolidation in the short term, we expect the combination of favourable earnings trends and the presence of TINA, i.e. the lack of alternatives, to feed fund inflows into equities. At some stage we could see FOMO, i.e. the fear of missing out, entering the stage. We are not there yet.
A moderate acceleration of global growth justifies a mild pro-growth choice of stock market favourites. We like the US as it offers the best liquidity and broadest choice, in particular in areas with strong secular growth. We like the EU for its pro-cyclical profile and the UK for its re-rating potential.
Renaissance of emerging stock markets, thanks to a widening of the growth differential in their favour.
Sector exposure should reflect a mix of defensive choices, mainly in healthcare, with some cyclical ones, such as in energy, financials and, in the euro area, technology as well as construction materials.
Eighth, secular trends should seriously be considered. They are numerous. For example, 5G or Artificial Intelligence, the rise of online shopping, of e-health. De-globalisation or infrastructure spending are other opportunities. Or water and waste management. Just to mention a few of them.
Ninth, gold is an unavoidable portfolio diversifier.
Alternative investments also offer attractive opportunities and provide diversification.