By John Drachman
With all of asset management’s “2020 Outlook” pieces posted by now, myperfectfinancialadvisor.com took a look at the top prognostications from the largest money managers in the world.
- Powerful structural trends will test limits in 2020 At Blackrock, pressures from events driven by rising populism, increasing income inequality and climate change offer potential shocks to the system similar to what we’re experiencing with the coronavirus outbreak. Don’t quarantine yourself yet though: “…Our overall gauge of vulnerabilities across the economy stands well short of its peaks prior to the last recession.”
- Remember diversification. Forget the Age of Innocence, Vanguard sees an “Age of Uncertainty” straight ahead. “Expect slowing global growth and elevated uncertainty creating a fragile backdrop for the markets.” With all of that doubt, it’s better to stay true to principles like diversification: “Based on simulated ranges of portfolio returns and volatility, the diversification benefits of global fixed income and global equity remain compelling.”
- An inverted world spells opportunity. Following 2019’s inverted yield curve, Charles Schwab shows how “Long-time asset trends have tended to reverse after yield curve inversions—that is, when short-term yields are higher than long-term yields.” The takeaway: In 2020, look for “new leadership by value, large-cap and international stocks.”
- The dot.com past may return to haunt. Citing the “Ghosts of Christmas Past,” JP Morgan Chase wags a finger at the fact that “the share of US market capitalization… from young, unprofitable companies is at its highest level since the dot.com bust.” Still, it’s hard not to be cheered by all of America’s happy consumers. “Part of our optimism for 2020 is based on the continued strength of the U.S. consumer. U.S. consumption is close to its highest share of global GDP since 2008 and consumers are still optimistic, in contrast to U.S. CEOs.”
- Expect the global economic recovery to continue State Street Global Advisors tells investors “The only way out is through.” A recession will likely be avoided “through a continuation of growth, subject to the global economy ‘sidestepping substantial risks’ to maintain momentum.” The upshot: “Equities offer value in North America.”
- Global retirement policies may reshape markets. For Fidelity, “the outlook for investors will depend on how governments respond to a wave of retirees in the world’s biggest economies.” The firm details the impact of a historical decline in labor force growth on consumers and markets as it takes a favorable look at the“60/40 stock/bond paradigm, or an otherwise appropriately diversified mix of stocks and bonds.”
- From the ‘Roaring 20s’… to the ‘Temperamental 20s.’ What a difference a century makes. Allianz expects 2020 to be unexpected. We could “witness a turning point in policies to defend growth at all costs as social tensions stay elevated, political risks multiply and climate change throws a wrench into the best-laid plans.” Still, positive signs abound for global growth, U.S.-China relations and investing close to home.
What portfolio events and themes are you pondering? For fresh perspectives on the impact of either big ideas or major themes on your portfolio, consider sharing your questions with a registered financial advisor. Even the most avid do-it-yourselfers might benefit from the occasional dialog with a professional sounding board.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing dialogs between investors and investment professionals.