Home2020 Market Outlook Around the world

2020 Market Outlook

Around the world

How would monetary and fiscal policies play out across the regions in 2020? Here we list out other key issues that could impact markets in the new year.

United States
EUROPE
Asia
including Japan
Emerging Markets

Asia including Japan

Asia including Japan

Political uncertainty has waned post the expected election outcomes across Asia. This will allow governments to press ahead with the various infrastructure projects and fiscal stimulus packages which should boost growth.

Central banks in Indonesia, the Philippines and possibly India are able to cut rates towards this end. In contrast, the Bank of Japan has less room to manoeuvre given that its policy rate is already at negative levels. The big question is whether the latest consumption tax hike will dent growth although the government’s spending package is likely to help soften the impact. Meanwhile, a trade deal between US and China will be a boon for global trade, growth and investor sentiment.

Emerging Markets

Emerging Markets

Emerging Markets are a mixed bag and the pace of domestic reform is in the spotlight.

A bright spot is Brazil, which is expected to post faster growth in 2020, following the passage of its landmark pension reform. In Argentina, however, a Fernandez presidency has heightened political uncertainty given his populist leanings. In Russia, muted inflation has created room for further interest rate cuts to boost the slowing growth, yet its outlook also lies in the progress of national projects, ranging from healthcare and education to infrastructure.

Notwithstanding all of this, any weakness in the US dollar could offer these economies some respite to service their US dollar debt.

Europe

Europe

The European Central Bank may have less room for further easing in 2020 following the comprehensive policy package announced in September 2019. As such, it remains to be seen whether Germany and other European countries will provide a meaningful fiscal response to help revive their economies and lift inflation.

The Brexit outcome will also play out over the course of the year. Any intensification of trade hostilities between Europe and the US will take its toll on the already ailing European economy - trade between the US and EU far outstrips Sino-American exports and imports.

United States

United States

With the Fed indicating that it is on a rate pause in October 2019, further cuts in 2020 will depend on US economic indicators, financial conditions and external events.

Although US economic growth may moderate, a near-term recession is highly unlikely. Meanwhile, the prospects for corporate America hinge on the outcome of US-China trade negotiations. Given that the competition between the US and China includes technological and financial dimensions, a comprehensive and long-lasting resolution may be challenging. The surprising outcome of the state elections in Kentucky and Virginia in late 2019 throws up the possibility of unexpected outcomes for the impending US Presidential Election.