Global Investment Outlook and Strategy
January 9, 2020
After a turbulent end to 2018, the S&P 500 Index produced its second strongest gain in two decades in 2019, as investors battled their way through an often chaotic, news-driven year. The U.S. economy enters 2020 on solid footing, aided by precautionary monetary easing, still-stimulative fiscal policy, a healthy consumer, muted inflation, reduced trade-related risks, and a prospective uptick in global growth. With the Federal Reserve now signaling an extended period of policy restraint, the lagged effect of the cumulative 75-basis point interest rate cut in 2019 will bolster domestic activity well into 2020. Finalization of both the “phase one” U.S.-China trade deal and the U.S.-Mexico-Canada Agreement should boost business confidence and spur capital spending as well.
From an investment perspective, the same set of conditions that has provided a near-perfect environment for stocks over the decade-long expansion appears sustainable over the intermediate-term, including slow economic growth and low interest rates underpinned by structural disinflationary pressures. With equity valuations now at “fair” levels, we believe an improvement in corporate earnings will be a key determinant of the direction and magnitude of equity returns going forward. While the “Goldilocks” environment is supportive of stocks near-term, 2020 is not without risks, including a re-escalation of the trade war, a further step down in economic growth, and unexpected inflation.
For more details, including a longer discussion of the outlook for global equity markets in 2020, please see Sit Investment Associates’ January 2020 Global Investment Outlook and Strategy paper. Click here: Global Outlook and Strategy (Adobe Acrobat) or e-mail us at: email@example.com.