As we enter a new decade in the investment realm riddled with volatility, how can investors position themselves to ride the turbulence ahead? In the following interview Steven Moeller, Head of Multi-Asset Strategies APAC, BlackRock shares his outlook for markets in 2020 and how investors can benefit from a multi-asset portfolio allocation.
1. It’s been a volatile year for markets in 2019 whether stemming from trade tensions, geopolitical risks or recessionary fears. Do you expect volatility to persist moving into 2020? Give us a sense of the macro outlook for the global economy
Growth should edge higher in 2020, limiting recession risks. This is a favorable backdrop for risk assets. But the dovish global central bank pivot that drove markets in 2019 is largely behind us. Inflation risks look underappreciated and the lull in US-China trade tensions could end. This leaves us with a modestly pro-risk stance for 2020.
The 2020 macro environment marks a big shift from the dynamics of 2019, when an unusual late-cycle dovish turn by central banks helped offset the negative effect of rising trade tensions. The US dovish pivot looks to be over for now. Any meaningful support in the euro area will have to come from fiscal policy and we do not see this in 2020. Emerging markets (EMs) however still have room to provide monetary stimulus.
2. The protracted US-China trade conflict now risks dragging on into its second year. How do you see this playing out or is it an old story?
US-China tensions remain front and centre. Both sides have strong incentives to hit the pause button on trade frictions, at least through 2020 — and on balance we think that is the likeliest outcome. Yet we expect pockets of turbulence, and there has been little progress toward resolving structural US-China rivalries.
There is broad, bipartisan support in the US to take a tough stance on China, and China looks prepared for a long struggle to gain global leadership in industries of the future. US restrictions on Chinese tech giants and technology exports to China have disrupted global supply chains — and intensified China’s drive to become self-sufficient in foundational technologies. This could lead to a gradual decoupling of the US and China tech sectors.