What might 2020 hold for global financial markets? Broadly, more of the same … Volatility.
The past year has experienced significant instability for the financial markets. December 2018 saw stocks sell off significantly only to rebound through April and then sell off again in May. Markets traded sideways through the fall only to breakout in October and November due to a Fed rate cut and increased hopes of a China‑U.S. trade deal being done. We expect more of the same for financial markets in 2020.
The U.S. is better suited to handle the global slowdown. The unemployment rate is at historical lows and wages are rising, albeit slowly. Consumer spending makes up about 70% of U.S. GDP and they continue to spend. U.S. growth will trend around 1%, likely avoiding a technical recession (i.e. two successive quarters of economic contraction). On the other hand, the Euro zone economies will continue to slow and waffle in and out of recession. The main causes are the impact of tariffs on industrial trade, political policy uncertainty (i.e. Brexit, nationalism, etc.) and monetary policy decisions (i.e. negative interest rates). China’s economy, along with other emerging market economies, will continue to slow as well – a direct result of the global trade spate and the impact that it is having on the developed world economies.
And let us not forget, the upcoming 2020 U.S. general election is upon us. The puppeteers of campaign marketing are feverishly gearing up to once again obfuscate the voting public. The election is less than a year away – Tuesday, November 3rd, 2020 is the official date – make sure you mark your calendars now.
Until then, prepare for another volatile year in the financial markets.