Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Access both platforms from your single Saxo account.
What to expect in 2020?
Peter Garnry
Chief Investment Strategist
Summary: The inflation trade is hot right now and this could be a major surprise for equities later this year. But our key convictions this year are that Italian equities will be one of the best equity markets, health care sector will underperform, 5G related stocks will outperform, IPO stocks will outperform in major comeback, a major acquisition in online streaming, sports athletics stocks will outperform, European and EM equities will outperform US equities, massive accounting fraud scandal in Asia, "climate" stocks will explode higher and electric vehicles will have their major breakthrough with Tesla surprising everyone.
The new year is off to a hectic start with tonight’s US attack on Iran’s top military leader raising the stakes in the proxy war between Washington and Tehran. Risk-off has accelerated in the last couple of hours with oil prices higher due to geopolitical risk premium and bonds being bid. But most interestingly is the move in gold up 6% since early December on rising central bank easing expectations and lower real rates. The US attack feeds the “inflation trade” that is clearly in action among large institutional investors. Yesterday, was one of the biggest days in terms of divergence between inflation-linked and nominal bonds indicating that investors are positioning themselves for an inflation surprise this year.
This is a serious risk factor for equities as historically equities decline either due to a recession or sustained inflation lasting over a year; equities actually rise during an initial inflation shock. Rising inflation would be mean higher nominal rates unless real rates go further into negative. If rates rise on inflation then this will have implications for growth vs value stocks and general equity valuation levels. But there are other important factors to watch in 2020 for equity investors. Everywhere you look predictions for 2020 are being published and of course you should not miss our predictions.
So what are our views and predictions on equities for 2020?
Italian equities will be one of the best performing equity markets in the MSCI World Index in 2020 driven by significantly higher equity valuations as earnings growth kicks into gear and Italian banks are lifted due to the success of the ECB’s tiering system on deposits. Italian equities have an attractive 4.1% dividend yield and is valued at a 35% discount to global equities providing meaningful catalysts for good performance in 2020 after being up 30% in 2019.
Latest Market Insights
Quarterly Outlook 2024 Q3
Sandcastle economics
-
-
Bonds: What to do until inflation stabilises
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.
-
Equities: Are we blowing bubbles again
Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.
-
FX: Risk-on currencies to surge against havens
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.
-
Commodities: Energy and grains in focus as metals pause
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)