Global growth is at point of positive inflection.
The dovish pivot by global central banks and policy easing by Beijing; the de-escalation of the US-China trade war and reduced Brexit uncertainty; and end of the inventory correction in manufacturing will support a pick-up in global growth relative to the US in 2020.
Risk premiums in lower rated credit and growth-sensitive assets, including emerging market currencies and corporate credit, will in my view decline as fears of recession fade.
But with mediocre growth and high debt, the global economy is vulnerable to negative shocks.
investors will continue to seek safety and diversification in core fixed income and investment-grade credit.
The search for yield is forcing investors to take on more risk. In credit, bottom-up credit selection and strategies unconstrained by benchmarks tied to single geographies and asset classes will remain popular.
Investors are also turning their attention to the grey rhinos – high probability and high impact risks from climate change and social instability. ESG investing is not a fad.
The dilemma facing investors as 2020 begins is to balance the pick-up in global growth with valuations of many assets at historic highs.
2019 was the year of the rally in everything. 2020 will reward the discerning and the bold.