The global economy will continue to expand this year, but investors will need to navigate significant market and geopolitical volatility, considering alternative approaches to generate sustained returns in this low-yield environment.
That is the view of Brown Shipley, a Quintet Private Bank, outlined in
Counterpoint, a new in-depth analysis of the world economy, financial markets and key asset classes. These findings were discussed at an event for clients and for intermediaries in Manchester yesterday hosted by Nick Cringle, Regional Head North West, Brown Shipley and Shanti Kelemen, Investment Director, Brown Shipley.
Counterpoint focuses on five key questions for investors in 2020, presenting both the consensus view and challenging that conventional wisdom:
- Following the longest growth cycle in history, will the US economy keep expanding?
- Can Europe address structural issues and thrive, avoiding the threat of “Japanification”?
- To what extent will the global trade war weigh on worldwide growth?
- Can central banks wield monetary policy to support economic expansion?
- How will markets react to the outcome of US presidential elections?
Reviewing the outlook for equity markets, Shanti Kelemen, Investment Director, Brown Shipley said: “While many believe that 2020 will see significant corrections, we believe that equities can continue to deliver positive returns,” highlighting the potentially bright outlook for the US and emerging markets such as China, India and Eastern Europe. She sees special appeal in the historically resilient IT sector and in healthcare, which continues to benefit from structural growth drivers.
Fixed-income investors, by comparison, will face a challenging year, according to Quintet’s Group Chief Investment Officer, who is positive on both European high-yield bonds and local-currency denominated emerging-market debt.
Given market volatility and geopolitical uncertainty, said Kelemen, diversification has become a key driver of reduced portfolio risk. “With historically low correlation to the performance of both equities and bonds, alternative investments can play an important role in delivering such benefits,” she said.
Turning to oil, Brown Shipley expects prices to remain under pressure as cost advantages and demand dry up. While she is positive on the British pound, Kelemen noted that a high cash allocation may act as a drag on portfolio performance, and sees appeal owning gold. Indeed, gold prices – which rose sharply in 2019 – should be supported in 2020 by continued central bank purchasing. “The growing stock of negative-yielding debt makes gold attractive and an effective diversifier within portfolios,” concluded Kelemen.
Nick Cringle, Regional Head North West at Brown Shipley, comments: “We are excited to host this event in Manchester, where our presence has grown significantly over recent years, and be able to present the key findings outlined in
Counterpoint to both clients and our professional intermediary partners”
“The North West is extremely important to our business. The Bank was founded in the region over 200 years ago and we remain focused on maintaining growth here. We’re currently seeing good levels of confidence amongst our clients in the region, especially following the increased levels of certainty delivered by the General Election, as well as progress in US-China trade talks and, not least, movement around Brexit. In the final analysis, 2019 was a strong year in financial markets, and whilst inevitably there will be some challenges in the year ahead, as
Counterpoint indicates, the mood remains one of optimism.”
