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Macro tips for 2020

Following a year of impressive gains, how can investors prepare for success in 2020? Mark Dowding talks us through the key macro points to watch and shares three investment tips for the year ahead.

On growth

We believe that the US can deliver growth above 2% in 2020. We see no evidence of the economy being late cycle or at risk of recession any time soon, based on domestic fundamentals.

Typically, recessions occur in a cycle following a period of restrictive monetary policy, which is enacted in response to signs of an economy overheating and inflation pressures rising.

For now, we’re pondering whether this cycle can continue to run and defy the doom and gloom predictions!

In Europe, we anticipate that forward-looking growth indicators could lift in the next couple of months, but stronger growth may require additional stimulus to come from a more expansive fiscal policy.

Only Germany is inching in this direction given its stubborn desire to deliver a balanced budget. Consequently, it is hard to see much growth momentum building.

On rates

We continue to expect further UK fiscal easing. Allied to a likely bounce in confidence following the comprehensive Tory win, we see the UK economic outlook improving in the next few months and believe that the Bank of England is unlikely to lower rates.

In the US, we anticipate monetary policy remaining on-hold in 2020, with the next move – whenever it comes – likely to be upward.

We predict that Treasuries will trade in a range between 1.6% and 2.3% in the months ahead, with a bias towards the top end of this range later in 2020.

Eurozone interest rates could remain stuck at current levels for a long time, potentially acting as an anchor to Bund yields.

On Brexit

We are very sceptical that a comprehensive deal will get done by the end of next year. Nevertheless, it seems sensible to set a deadline in order to increase pressure for progress to be made.

If an agreement has not been reached by December 2020, it will be easy for UK laws to be amended to lengthen the transition process, averting a new cliff-edge ‘no deal’ scenario.

However, close monitoring will be required and it will be interesting spending time with European policymakers in the coming few weeks to discern the attitude in Berlin and Brussels now that any hopes of ‘remain’ have been extinguished.

On emerging markets

The emerging market (EM) landscape looks set to be heterogeneous in 2020, with the return backdrop likely characterised by contributors and detractors.

While the macro environment is broadly supportive, we note significant domestic economic challenges in countries like Turkey and South Africa. Elsewhere, political challenges may continue to impact the performance of Latin American assets.


Carry was the winning theme of 2019, with the top-performing currencies all being the high yielders, at a time when G7 FX volatility remained very low and markets lacked direction.

This backdrop may persist for the time being, though we can see more opportunities for relative value trades in areas like EM, given divergent fundamentals and a clearer distinction between winners and losers.


Against this backdrop, how can investors maximise their chances of investment success in 2020?

  1. Be vigilant – don’t underestimate the benign backdrop.
  2. Prepare to navigate volatility spikes – we’re predicting periods of calm punctuated by rapid fluctuations.
  3. Don’t chase price action – be disciplined and stick to selling during strength and buying into dips.