19 Dec 2019
Main issues for 2020
Presented by Chris Lioutas - PSK's Chief Investment Officer
Whilst we’ve seen some recent de-escalation of risks surrounding the US-China trade war and Brexit, significant risks still remain for 2020.
Limited details have been released regarding the deal reached between President Trump and President Xi, which the market doesn’t really seem to care about from a details perspective. But the details are important when it comes to understanding what a phase 2 trade deal might look like and when that’s like to occur. However, as it stands, the phase 1 deal has prevented two additional rounds of tariffs coming through, which would have been significant, but it doesn’t look like it’s resulted in a winding back of tariffs already in place. In addition, as we’ve seen recently, President Trump has turned his tariff attention to others, namely Brazil, Argentina, and France.
The US Presidential race is another key issue to monitor in 2020. Whilst we’ve just seen the Democrat-controlled lower house vote to impeach President Trump, there’s almost no way the Republican-controlled Senate will sign off on impeaching their own President. As it stands right now, President Trump remains likely to win a 2nd term in office come the elections towards the end of the year. Michael Bloomberg has thrown his hat in the ring in the Democrat race, which will be interesting given he’s the wealthiest, the most famous, and the most centre-leaning candidate on the Democrats side. He will effectively need the full support of the Democrats if he’s to stand a chance. Interestingly, from a market perspective, both Bloomberg and Trump would be positive for markets.
The third main issue relates to the direction of markets given the super-sized returns we’ve seen in 2019. As it stands, we think 3 scenarios are likely for 2020 – more of the bumper returns from 2019; a more benign environment were markets are range-bound through the course of the year; or a capitulation in market sentiment driven by rising political risks which cause economic risks to spike. The likelihood of each has been moving around fairly regularly, and this seems likely to continue as we begin 2020.
If you’d like to discuss any of the points raised, please do not hesitate to contact us on 9324 8888.
PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) are Authorised Representatives of Charter Financial Planning Ltd (AFSL 234666), Australian Financial services Licensee and Australian Credit Licensee. Information contained in this article is general in nature. It does not take into account your objectives, needs or financial situation. You need to consider your financial situation before making any decisions based on this information.