The harvest of 2019 it turned out better than expected to investors. In January a year ago nobody gave a euro for the risky asset. The global recession seemed imminent azuzada by geopolitical conflicts and trade wars. However, the final balance was positive for the income variable. The MSCI World index, the best gauge of world stock markets, climbed a 27,68% last year. In fixed income, although in the short stretches and emissions most solvent the harvest was lean by the impact of monetary policies, there was a prize for those who chose to bond with something more than danger. And in commodities and some assets depararon joys; a clear example is gold, which noted a rise of 18,31%.
Now, and as it says in the old adage of the market, past performance are not synonymous of revenues in the future. Therefore, the start of the new course forces savers to rethink the strategies. What can happen in the markets in 2020? A priori, the economic environment is more favourable than 12 months ago. The tension tariff are atemperando and the consensus forecasts suggest a moderate acceleration of global growth, although always below the average that was recorded after the departure of the Great Recession. This diagnosis does not mean that investors will be able to sleep on the laurels. The experts consulted warn of the potholes that may come, to recognize that returns may not be as good as in 2019, and remember that, in a context conditioned by interest rates negative, who want to fish benefits will have to be willing to take some risks.
interest Rates U.S.
In %
6
4
2
0
1,75
2007
09
11
13
15
17
19
interest Rates in the euro area
In %
5
4
3
2
1
0
0,00
2007
09
11
13
15
17
19
Source: Bloomberg.
THE COUNTRY
interest Rates U.S.
In %
6
4
2
0
1,75
2007
09
11
13
15
17
19
interest Rates in the euro area
In %
5
4
3
2
1
0
0,00
2007
09
11
13
15
17
19
Source: Bloomberg.
THE COUNTRY
interest Rates U.S.
interest Rates in the euro area
In %
In %
6
4
2
0
5
4
3
2
1
0
1,75
0,00
2007
09
11
13
15
17
19
2007
09
11
13
15
17
19
Source: Bloomberg.
THE COUNTRY
Two of the recommendations, diversification of assets in portfolios, and flexibility in decision making, are the most repeated in the strategy reports that asset managers, private banks and brokers have been sent to their customers. “The current environment warrants an approach of caution and diversification that goes beyond the allocation to conventional bonds and equities. While emerging markets and equities japanese still seem attractive, other returns alternative adjusted for risk to arise in those asset classes, less common for investors”, recalls James McCann, chief economist of Aberdeen Standard Investments. This view is shared by Eva Brown, of UBS Asset Management: “The maturity of the cycle and geopolitical risks residual increasing the prospect of outbreaks of intermittent volatility in 2020. In an environment of lower growth, it is likely that the returns of risky assets are inferior to those who have earned investors over the last decade. In this context, staying flexible and agile, taking advantage of investment opportunities as they arise, will be an important quality in the next six months and beyond.”
below are the forecasts of the experts for each asset class by 2020.
1 variable Income.
Bonus German
the 10-year Yield in %
0,4
0,0
-0,4
-0,8
-0,29
E
F
M
To
M
J
J
To
S
Or
N
D
Euro / dollar
rate of exchange euro/dollar
1,15
1,13
1,11
1,09
1,110
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Source: Bloomberg.
THE COUNTRY
Bonus German
the 10-year Yield in %
0,4
0,0
-0,4
-0,8
-0,29
E
F
M
To
M
J
J
To
S
Or
N
D
Euro / dollar
Exchange rate euro/dollar
1,15
1,13
1,11
1,09
1,110
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Source: Bloomberg.
THE COUNTRY
Bonus German
Euro / dollar
the 10-year Yield in %
rate of exchange euro/dollar
1,15
1,13
1,11
1,09
0,4
0,0
-0,4
-0,8
1,110
-0,29
E
F
M
To
M
J
J
To
S
Or
N
D
E
E
F
M
To
M
J
J
To
S
Or
N
D
2019
20
Source: Bloomberg.
THE COUNTRY
The actions remain, according to analysts, the asset that offers a better relationship in the team that puts in relation the profitability and the risk, especially if compared with its great competitor: the debt. However, after the significant rises of the indexes in 2019, there will have to be more selective because there are certain values that begin to trade at multiples very demanding. “Everything seems to indicate that equities will beat you back to the fixed-income in 2020, although it will not be a bed of roses in a period of transition from one monetary policy to a fiscal policy” highlights from Union Bancaire Privée (UBP).
The key to the stock market can keep rising in the medium term is in the benefits business. In this sense, the trend of corporate profits is low. In the US the earnings per share (EPS) has dropped to 1.6% year-on-year, while MSCI’s index, the decline is 0.6%. In parallel, the markets in 2019 rose more strongly: a 22,34% the Dow Jones u.s., the 25,48% of the German DAX, the 12.1% in the FTSE 100, british or 11,82% in the Ibex 35.
For how long can occur this divergence without the price of contributions to overheat excessively? Peter van der Welle, strategist at Robeco, remember that the lower business profits do not have to drag automatically the stock price and believes that investors discounted that at some point in 2020 will be able to reverse the trend of corporate earnings. “The financial markets are focused on the future and usually try to anticipate the next phase of the business cycle,” he says. All in all, in the manager Dutch have decided to increase the prudence in their portfolios, even if they are slightly sobreponderados on the Stock exchange. “We have reduced our exposure to equities in the last few weeks, since we consider that the potential rise associated with the assumed risk in this category has been reduced”, says Van der Welle.
MSCI World Index
In points. Formed by 1.644 companies
2.366
2.400
2.200
2.000
1.800
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Ibex 35
In points
9.600
9.200
8.800
8.400
9.599
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Source: Bloomberg.
THE COUNTRY
MSCI World Index
In points. Formed by 1.644 companies
2.366
2.400
2.200
2.000
1.800
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Ibex 35
In points
9.600
9.200
8.800
8.400
9.599
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Source: Bloomberg.
THE COUNTRY
MSCI World Index
Ibex 35
In points
In points. Formed by 1.644 companies
9.600
9.200
8.800
8.400
9.599
2.366
2.400
2.200
2.000
1.800
E
F
M
To
M
J
J
To
S
Or
N
D
And
F
M
To
M
J
J
To
S
Or
N
D
E
E
2019
20
2019
20
Source: Bloomberg.
THE COUNTRY
Wall Street closed the year at historic highs and the forecasts predict an economic slowdown (moderate) in the united STATES in a time in which fiscal stimulus are waning and business investment is suffering because of the trade tensions. In this context, and without abandoning completely the exposure to the u.s. equity, experts suggest that 2020 will be a year to fish in other fisheries, mainly the emerging countries. “Equities will experience positive returns, but much more limited than in 2019,” says Joan Bonet, director of markets strategy at Banca March. “The emerging economies will contribute 80% of global growth this year, while their companies are under-represented in the indices, so we recommend to increase exposure to the stock Exchanges emerging, particularly asian,” adds Bonet.
Another market with gasoline for climbs can be the european. “We remain optimistic with regard to equities outside the U.S., particularly in Europe. People tend to talk negatively about this region, but many of their values from growth are doing very well. In addition, there has been a transfer of money from companies from growth to defensive actions that we think should be corrected in the future,” according to Elisa Mazen, of Legg Mason.
A factor that can bring volatility to the market are the u.s. elections, although analysts relativize the impact of the winner of the elections in the evolution of the stock price. “If we look at the results obtained since 1932, the u.s. markets have tended to rise regardless of whether the victory beyond republican or democrat. Those investors who held their investment for at least one year were rewarded for their patience, although they had to cope with the increase of the volatility registered during the phase of the primaries,” says Greg Johnson, manager of Capital Group.
Gold
In us dollars per ounce
1.553
1.550
1.450
1.350
1.250
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Oil
Barrel Brent in usd
75
70
65
60
55
65,15
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Source: Bloomberg.
THE COUNTRY
Gold
In us dollars per ounce
1.553
1.550
1.450
1.350
1.250
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Oil
Barrel Brent in usd
75
70
65
60
55
65,15
E
F
M
To
M
J
J
To
S
Or
N
D
E
2019
20
Source: Bloomberg.
THE COUNTRY
Gold
Oil
In us dollars per ounce
Barrel Brent in usd
1.553
75
70
65
60
55
1.550
1.450
1.350
1.250
65,15
E
F
M
To
M
J
J
To
S
Or
N
D
E
F
M
To
M
J
J
To
S
Or
N
D
E
E
2019
20
2019
20
Source: Bloomberg.
THE COUNTRY
With the price of money for the land, the strategies based on the search for companies with high remuneration to shareholders remain valid. “In the Bag, we focus on the dividend yield, which offers a 3% average. In Europe we have a preference for companies of medium capitalization in the face of large values”, suggest from Ostrum. This strategy is based on companies with cash flow generation that is pampered to their owners is shared by Josep Maria Tacias, of Rentamarkets: “On variable-income Spanish-bet securities with good fundamental and dividend yield as Repsol, Iberdrola or Power Grid. Other companies interesting could be Siemens, Gamesa, to possible corporate movements, and Inditex, due to their positive results from recurring. Attention to the banking sector by the ECB to take any action favorable to their interests.”
2 for fixed Income.
The fixed income, the asset to conservative par excellence, is still very much conditioned by the political types are incredibly low for central banks. In 2019 the route sheet of the ECB and the Federal Reserve, pointed to a normalization of the price of money, and a reduction of the stimuli, but this strategy was shelved before the economic slowdown and the geopolitical uncertainties. In this sense, the past course policies accommodative in terms of monetary and low inflation allowed the bonds, both public and private, to live a good year, as they again act as places of refuge in the face of rising uncertainty. Especially good was the harvest for the business debt due to lower costs of corporate financing, some ratios of non-payment reduced, and the quest for profitability on the part of investors in an environment of a negative rate.
In 2020, experts at Bankinter pointed out that they “need not be bad, but you have to be selective and to manage the duration”. This signature indicates that the assessment of the public debt of the bonds of the highest creditworthiness as the German has a “limited risk of fall”. In contrast, indicate that the emissions of the countries of the european periphery such as Spain, Ireland and Portugal earn attractive “because their economic growth rates are higher than the EU average and the risk premia are stable”.
In the strategy reports is usually no coincidence that the new course may be optimal to search for profits in the emissions of the emerging countries, both in companies and in sovereign bonds. “Due to the low profitability of the government bonds and corporate europe, and higher ratings require some emissions, invertiríamos in funds with low duration and active management, even with a risk currency or fixed income fund, emerging to have a presence on these mercados,” advises Tacias, of Rentamarkets.
Banca March believe that the returns of fixed-income in 2020 will be smaller in 2019, “although there are still opportunities in the credit of european investment grade, which will be benefited by the purchases of the ECB”. Since this entity also recommend the emerging debt.
The flexible management of portfolios in fixed income will also be key in an environment that is expected to volatile. That means play with the volume of cash in the same. “We maintain a position of 10% in liquidity to be able to take advantage of the opportunities that may arise in the first quarter, as, for example, the convertible bonds in the event of an increase of the volatility or emissions quality or premium in the primary market of credit,” says Ibrahima Kobar, of Ostrum.
3 alternative Assets.
In an environment of uncertainty, the search for returns in assets that are poorly linked with the evolution of the world economy is becoming increasingly important. Yes, they are strategies that involve a dosage of greater risk, since it is active mostly unlisted and involve a greater illiquidity. Therefore, it is appropriate to allocate only a part of the portfolio to this universe, which includes everything from infrastructure to venture capital, through shares or bonds are not quoted or for certain real estate products, and, if it can be, invest in the hand of a professional manager or a collective investment vehicle. “Investments in markets do not stock can have an important role in the strategies. Savers who do not need immediate access to a portion of its total assets may benefit from higher returns in the long term due to the premiums paid for the illiquidity and the access opportunities of niche”, they argue from UBS.
Credit Suisse also highlighted the importance of financial assets not conventional. “Alternative investments are now a basic component of the portfolios, particularly in the current world of interest rates and low yields will remain for a longer time. These assets are valued not only for their benefits of diversification, but also because they provide the opportunity to stabilize the portfolios”, account in the swiss bank.
In this same line is displayed in Banca March: “The year 2020 is the beginning of a new decade, subject to constant changes, in which the investor will have to take advantage of the opportunities they can offer new trends such as the green economy, the technology or the infrastructure”.
