Al Mal 2020 Global Investment Themes

Our January edition of Perspectives includes our Top 10 Global investment Themes for 2020: https://bit.ly/2udidmH

You will find below a high level summary:

# Theme 1: Stay Invested Into Risk Assets. As mentioned in the asset allocation section, our base case macro scenario is favorable to risk assets. While we expect more corrections and volatility down the road, we also believe that a globally-based, broadly supported cyclical bull market could unfold. 

# Theme 2: US Elections. Heading into 2020, the U.S. presidential election is top of mind for investors asking how it might impact their portfolios. While national elections generally don't substantially affect global investors, the U.S. election is an exception to that rule. Indeed, investors both in the U.S. and abroad should pay attention in the run-up to the election and monitor the debates for a number of key issues and this for at least two reasons. First, a win by the incumbent party historically had a positive impact on the US equity market Second, there are numbers of themes which will be debated ahead of the elections by the candidates.   

# Theme 3: The Return Of The Underdogs We have been through an extraordinary period of value factor under-performance over the last 15 years. There were only two periods of extreme divergence in style performance over the last 30 years: the “Tech Bubble” (growth outperformed sharply between 1994 and 2000) and the pre-GFC (Value outperformed sharply between 2000 and 2008). Historically, a brutal style rotation took place in each of the two previous extreme periods.

# Theme 4: US Small-Caps. US small cap companies have also been among the “underdogs”, lagging large caps in four out of the last five years. We believe they are due a catch-up. 

# Theme 5: Brexit Boost. After three and a half years of Brexit uncertainty, we see the UK as set for a rebound. Indeed, the Sterling, the UK equity market and UK property have all been out of favor since the referendum vote in favor of Brexit in June 2016. To our opinion, a formal Brexit will, we think, take place at the end of January. We also believe that the UK and EU will find a satisfactory way of working together. This could lead to a significant improvement of investors’ sentiment towards the UK by the end of 2020.

# Theme 6: Emerging Asia. As discussed in the 2020 Global Outlook section, we are positive on emerging markets equities including Emerging Asia. More specifically, we do have a positive view on the three following countries: Indonesia, Philippines and Vietnam.

# Theme 7: Greater China Equities Due to downward pressure on the Chinese economy, policymakers in China recently shifted to a modest monetary easing stance. This should help in boosting market sentiment on Chinese equities, hence our positive view on Greater China. While Taiwan looks expensive after the 5G Theme driven rally in 2019, we believe that Mainland China and Hong-Kong stocks offer investors with attractive upside potential. 

# Theme 8: Green Investing. 2019 will be remembered by many as the year the world woke up to climate change. Going forward, tackling climate change will move to the top of the agenda around the world. Acceptance of the fact that greenhouse gas emissions cause global warming and that these need to be curbed will become (almost) universally accepted. The realization that action on climate change is needed is rapidly moving into the mainstream. A big theme for 2020 will be more spending on green initiatives

# Theme 9: Capital Preservation Within Fixed Income. As mentioned in our Global Outlook section, our base case is for a cyclical improvement in 2020. We expect the major developed world central banks to keep interest rates at or below their current levels in 2020. That will make 2020 a tricky year for developed market fixed income. A “baby bear market” in bonds is likely should the global economy start to re-accelerate. The best way to preserve capital and “clip” a decent coupon is to look for value within credit markets.

# Theme 10: Buying Gold And Bitcoin As Portfolio Insurance.

While the corona virus outbreak has been challenging some of these themes in January, we stick to our core scenario and favorite investment themes.