DBS 2020 Outlook: Beyond Economics


Elections, populism, civic unrest, climate change, geopolitics, cyber security, and great power rivalry; these factors will compete with economic data to drive market sentiments in 2020.
Taimur Baig02 Dec 2019
  • Rates: DM central banks will be on pause, allowing Asian counterparts to keep policy loose
  • Currencies: Murky recovery prospects
  • Credit: Modest spread compression seen on trade truce and longer global policy accommodation
  • Equities: A rotation from DM to EM looks likely given the wide valuation gap
Photo credit: AFP Photo


• Elections, populism, civic unrest, climate change, geopolitics, cyber security, and great power rivalry; these factors will compete with economic data to drive market sentiments in 2020. Trade war and tech disruption are slated to continue, and secular headwinds to G3 and China would remain. On the plus side, the electronics and auto cycles will likely bottom, central banks will keep liquidity ample and interest rates low, commodity prices are unlikely to jump, and fiscal policy in large parts of the world would play a more proactive role in generating demand. But asset price valuations look frothy in most parts of the developed markets and in some parts of emerging markets, while the broad and sharp rise in leverage is striking. An optimistic scenario would entail an orderly slowdown in the US and China, and a smooth rotation from growth to value and DM to EM assets by investors. But such dynamics would require non-economic factors to remain in check, something we can hope for without being particularly confident.

• Rates: DM central banks will largely be on pause, allowing their Asian counterparts to keep monetary policy loose.

• Currencies: Murky recovery prospects

• Credit: Modest spread compression seen on trade truce holding and longer global policy accommodation

• Equities: A rotation from DM to EM looks likely given the wide valuation gap


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Taimur Baig, Ph.D.

Chief Economist - G3 & Asia
taimurbaig@dbs.com
 

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