Key factors shaping investment markets in 2020

Strong and clear forces are now emerging that will have a dramatic effect on shaping the investment conditions for 2020, with coronavirus, oil prices, inflation, monetary and fiscal policies and unexpected events all on investment manager’s watch lists.

Lonsec Investment Solutions Executive Director and CIO, Lukasz de Pourbaix says we can expect a greater frequency of unexpected events such as coronavirus but geopolitical events such as the 2020 US Election also fall into this bucket.

Innova Asset Management’s Managing Director and Co-Chief Investment Officer Dan Miles agrees.

“Trump previously won on a platform of popularism but the threat of popularist views is that while these can be good at representing the mainstream, they are not necessarily good for Wall Street.”

The continuation of central bank and government intervention into markets via monetary and fiscal policies and prevailing low interest rates will continue to be a theme in 2020.

While weakening economic data has driven the use of monetary policy by governments, investment managers believe going forward, there will be a greater focus on fiscal policy.

“We have had ten years of very loose monetary policy,” says Daniel Choo, Portfolio Manager, Russell Investment’s. “It is a very important time of the cycle where we believe many governments are looking to increase their fiscal spend.”

The threat of inflation recession will shape 2020 as will ‘regime change’ which InvestSense Director Jonathon Ramsay says will not change what we do, but it will change our understanding of it.

“There is a lot of inbuilt pressure below the surface, for example in the US where there is a lot of debt, so we could see further shocks flow further down the credit chain especially in the US,” he says. “But maybe the rest of the  world could look different, like Asia and Japan which may muddle through.”

Share repricing will also continue to be a trend in 2020, with valuations driven down to more reasonable levels.

“Corporate earnings growth was flat to negative last year but this year with the coronavirus, there is a focus now on profitability, so there is repricing in the market,” says Miles.

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