Outlooks here come from wealth managers at Standard Chartered and Janus Henderson, with the focus on equities and the ever more relevancy of alternatives. We continue our series at the end of 2019 of looking ahead over the next 12 months.

As the year winds down and thoughts turn to 2020, here are some more outlooks for the coming 12 months. (The comments came in yesterday as the US became gripped by the impeachment drama.)

Standard Chartered

Equities are likely to outperform bonds due to stabilising growth and supportive policy
Standard Chartered’s Wealth Management Advisory group released its market outlook for 2020 this week with the view that financial markets are likely to face a balancing act in 2020. Against a backdrop of stabilising growth and supportive policymakers, equities – led by the US and euro areas – are expected to outperform bonds, within which emerging market bonds should outperform developed market bonds, the global bank said.

“As major central banks have already eased significantly, we believe they are likely to either leave policy as is or possibly ease a little further. The focus is likely to shift to fiscal policy where government spending in both major emerging and developed markets could turn increasingly supportive of growth. This will help equities outperform bonds,” said Steve Brice, chief investment strategist at Standard Chartered Private Bank.
 
An overview from its global investment committee across key asset classes:
•    Bonds: Strong performance in 2019 across both government and corporate bonds means they start 2020 with a lower yield and more expensive valuations than a year ago, leading us to expect lower, but still positive total returns in 2020. We prefer emerging market bonds over developed market bonds, across both government and corporate categories.

•    Equity: The backdrop for global equities in 2020 remains positive, with euro area equities the most preferred in the year ahead. Both euro area banks and US technology are amongst our preferred sectors.

•    FX: We believe the USD is peaking after trending higher since early 2018, and will begin a broad-based downtrend. The EUR and GBP are likely to be the biggest beneficiaries on the back of fading US economic exceptionalism, narrowing economic growth and interest rate differentials as well as political uncertainty shifting from Europe to the US Presidential election.

•    Multi-asset: We add risk asset exposure moderately to global/Asia-focused balanced and global multi-asset income allocations, given our central scenario of stabilising global growth and subdued inflation in support of pro-growth assets, and low yields and accommodative monetary policy globally to cushion income assets.

Views from Janus Henderson
•    Equities: 2019 saw stocks hit record highs, even as geopolitical uncertainty led to heightened market volatility. We believe swings in sentiment could continue in 2020 and that a focus on fundamentals will be more important than ever. Investors should diversify geographically, with equity leadership potential in Europe and Asian markets outside China.

•    Fixed income: Central bank policy will determine if a global recession is avoided in 2020 – and we believe it will. This will be coupled by an extension of the credit cycle supporting corporate bonds, but with the mathematics of already-low yields, investors will have to look across the entire range of fixed Income, with asset-and mortgage-backed securities being of potential interest.

•    Alternatives: Alternative investments have grown markedly in popularity. The asset class is ever more relevant as investors question how much more traditional asset classes have to give. We believe diligence is required when assessing the options. In our view, while timely given current conditions, adding truly diversifying sources of return to balanced portfolios is an approach with long-term merit.