The investment outlook for 2020 - J.P. Morgan Asset Management
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The investment outlook for 2020

Investment strategies for a late-cycle environment


We expect both the U.S. economy and the global economy to grow in 2020, with somewhat weaker growth in the U.S. and faster growth overseas.


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In Brief

  • Social distancing measures to combat COVID-19 have plunged the global economy into the deepest recession since the Great Depression.
     
  • Some success in slowing the spread of the disease and a recognition of the economic toll from social distancing are leading to a relaxation of social restrictions. However, a resumption of a normal economy will have to await the widespread distribution of a vaccine, hopefully in 2021.
     
  • In the U.S., following a huge GDP decline in the second quarter, we expect to see a sharp bounce in the third. However, progress from then on should be slow until a vaccine is distributed. This suggests double-digit unemployment into 2021.
     
  • While Fed easing and the recession have generally reduced Treasury rates, massive QE does threaten higher inflation and higher rates down the road. Meanwhile, the recession is leading to a wave of corporate downgrades.
     
  • While there are good reasons for U.S. equities to remain relatively resilient in the midst of the social distancing recession, the rebound in stocks from their March lows may be overdone, risking a correction in reaction to disappointment in economic data or medical progress.
     
  • Although the entire world economy has slumped into the social distancing recession in a similar way, the paths out could be quite different and those economies with more disciplined public health practices or deeper pockets could fair better in the rebound.
     
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2020 Key Themes

U.S. economy

It is clear that the U.S. has fallen into its deepest recession since the Great Depression. What is less obvious is the shape that the recession is likely to take in upcoming quarters.

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International economy

Over the next few quarters, the global economy will begin to recover from its COVID-19 induced deep recession.

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Investing principles

Timeless investing principles are especially relevant in the current recession given the heightened uncertainty and volatility expected throughout 2020 and beyond as the world adapts and subsequently recovers from COVID-19.

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Fixed Income

Core bonds performed well through the first half of 2020 as pervasive risk-off sentiment amidst a global recession and the reintroduction of quantitative easing (QE) domestically weighed heavily on long-term U.S. bond yields.

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Alternatives

High-quality fixed income provides you with protection, but no income. Risk assets increasingly provide you with income and growth, but no protection.

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U.S. equities

Investors have been caught flat-footed by the uninterrupted bounce back in equity markets from the March 23 lows.

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Asset allocation

Consider if they are positioning themselves for the short term the trough of the recession and any modest pre-vaccine recovery or the longer term the post-vaccine resurgence in global economic activity and the growth thereafter.

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