EMEA Market Insights looks ahead to 2020 and considers what might be in store for global markets.
The economic map for 2020 is far from clear. The early months of the year may see a small reprieve in manufacturing activity, but overall global growth is likely to remain constrained by geopolitical uncertainty.
Risk assets had an optimistic 2019, but stagnating earnings growth means valuations now look less supportive. Given pressure on margins, we struggle to see a significant reacceleration in earnings growth in 2020.
Central banks are likely to remain a key pillar of market support, given their demonstrated willingness to push deeper into uncharted policy territory to keep the expansion going.
Against this backdrop, we favour a regionally neutral, defensive equity allocation. Government bonds still have a role to play as insurance, despite low yields, but we believe investors should also consider other diversifiers, such as infrastructure and macro funds.
Given the binary nature of some of the political risks, investors may wish to consider some allocation to assets in emerging Asia that are likely to benefit if trade uncertainty resolves.
Inflation appears to be off the cards for now, but any resurgence would likely upset the price of both stocks and bonds, so real assets could provide a useful portfolio buffer.
We expect the focus on sustainability to continue to grow, with potential regulatory and policy responses having wide-ranging investment implications.
The Market Insights program provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the program explores the implications of current economic data and changing market conditions. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programs are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programs, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This communication is issued by the following entities: in the United Kingdom by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions by JPMorgan Asset Management (Europe) S.à r.l.; in Hong Kong by JF Asset Management Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited; in Singapore by JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), or JPMorgan Asset Management Real Assets (Singapore) Pte Ltd (Co. Reg. No. 201120355E); in Taiwan by JPMorgan Asset Management (Taiwan) Limited; in Japan by JPMorgan Asset Management (Japan) Limited which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Cth) by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919); in Brazil by Banco J.P. Morgan S.A.; in Canada for institutional clients’ use only by JPMorgan Asset Management (Canada) Inc., and in the United States by JPMorgan Distribution Services Inc. and J.P. Morgan Institutional Investments, Inc., both members of FINRA; and J.P. Morgan Investment Management Inc.
In APAC, distribution is for Hong Kong, Taiwan, Japan and Singapore. For all other countries in APAC, to intended recipients only.
Copyright 2019 JPMorgan Chase & Co. All rights reserved.
All illustrations are property of JPMorgan Chase & Co. unless otherwise stated