Globally, 2020 is likely to be dominated by the US presidential elections – and Trump’s actions, tweets and statements during the campaign. In the UK it will once again be Brexit.
Here, Darius McDermott, managing director of Chelsea Financial Services, gives us his outlook for 2020.
“Overall I expect it to be a reasonable year for equities, but I expect bond markets to be difficult and property to have challenges. Commodities may finally see some light.”
“Donald Trump has managed to both tie his presidential success to the US stock market, and influence its direction. In his quest for a second term, I believe he will do everything in his power to both avoid recession and keep the stock market climbing higher.
“I expect some ‘first phase’ resolutions in terms of trade wars, which will be positive for both the US and Asia including Japan.
“The Federal Reserve has halted its interest rate rises, and many other central banks, including the European one with new head Christine Lagarde, are looking to undertake more fiscal stimulus, which should prove positive for equities.
“In the UK we’ve already seen a relief rally on the back of the general election. If global fund managers believe that the outlook for the UK is now more positive, their reallocation to UK equities – even back to a neutral positioning – should gently push the stock market higher.”
Equity fund ideas for 2020:
JOHCM UK Dynamic, Jupiter UK Special Situations and Montanaro UK Income
“I still struggle to see value in bonds. Many are negatively yielding or close to zero, so we have stuck to the higher yielding end of the spectrum, willing to take on some extra credit risk in return for a half-decent income.
“Careful selection is required, however, and in our VT Chelsea Managed funds we have favoured very experienced managers with specific skill sets and funds with decent yields.”
Bond fund ideas for 2020:
Jupiter Strategic Bond, TwentyFour Dynamic Bond and Man GLG Strategic bond
“Commodities have been out of favour for a number of years now but increased fiscal stimulus around the world could help stimulate demand.
“Extra infrastructure spend from developed countries and the shift to renewable energy could finally be the lift the asset class needs.”
Commodity fund ideas for 2020:
BlackRock Gold & General, BlackRock World Mining and JPM Natural Resources
“Given the recent trading suspension of the M&G Property Portfolio, UK commercial property is still obviously challenged and the asset class is likely to remain out of favour for a while.
“In this environment I would be tempted to keep any property allocation to property securities instead of physical property, and look to invest in other countries as well as, or instead of, the UK.
“However, the general election result does give some relief to the UK residential property market. Transaction volumes should now pick up and bring new impetus to the UK housing market. If the economy picks up and individuals feel more confident, this should also help.”
Property fund ideas for 2020:
TM home investor, Premier Pan European Property Share and BMO European Real Estate Securities
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views are his own and do not constitute financial advice.