Market outlook 2020 by the world's leading investment companies:
UniCredit Bank Austria presents investment outlook together with 11 leading investment houses worldwide
- Low interest rates and negative bond yields will remain a reality in the longer term
- The intervention of central banks and robust consumer momentum prevent a global recession
- The trade conflict between China and the USA as well as geopolitical tensions were and remain the main worries.
- An actively managed, broadly diversified securities portfolio and equities continue to offer good return opportunities despite a challenging environment
“The financial markets continue to face a number of uncertainties. Nevertheless, the current stock market rally has been going on for over 10 years, and the question of how much fuel is still in the tank naturally occupies many investors,” says Monika Rosen, Chief Analyst of UniCredit Bank Austria Premium Banking at the UniCredit Bank Austria Investment Lounge. On the one hand, investors were confronted with negative news throughout the year, such as the smouldering trade conflict between China and the USA, the global economic slowdown or the Brexit scenario. At the same time, 2019 was also the best year since 2014 for widely diversified investors.
Why was this so and how will the markets continue in 2020? The analysts of the world's 11 leading investment companies dealt with this issue at the invitation of the largest domestic asset manager, UniCredit Bank Austria at a top-class event.
Low interest rates and negative bond yields are here to stay
One finding shared by all experts is that low interest rates and negative bond yields will not disappear so quickly. “This means that, in the current situation, those who have not invested in securities cannot maintain the purchasing power of their assets,” explains Mauro Maschio, member of the Management Board Privatkundenbank of UniCredit Bank Austria. For him, the reason for this is quite simple: “If savings interest rates are lower than inflation, assets are subtly devalued with traditional forms of investment.”
However, even an investment in fixed-interest government bonds that are not traded, but held, currently brings predominantly negative returns. Just over 60 percent of eurozone government bonds are now yielding negative yields.
Central banks cut interest rates again to prevent global recession
This was made possible by interest rate cuts by the major central banks, which reacted to the weakening economic growth. The ECB has even linked the reintroduction of interest rates to the inflation target of two percent.
These measures were necessary because global economic growth has cooled dramatically as a result of trade conflicts and geopolitical tensions. Corporate profits are stagnating and the economic mood among large companies is rather modest. The industrial uncertainty created by the trade conflict between China and the USA has begun to spread across the various sectors of the economy.
The reaction of the central banks seems to be having an effect: The labour markets in the USA and Europe are still stable and the population's propensity to consume is positive.
For this reason, most experts consider the risk of a global recession to be only moderate. This picture was also supported by the latest growth figures from Germany. In the third quarter, the German economy grew by 0.1 percent, thus avoiding a second consecutive negative quarter, i.e. a technical recession.
Interest rate hikes in the euro zone are de facto ruled out by all experts present for the foreseeable future. In this respect, investors must face the challenge of generating a return in a low-interest environment for the time being, which is ultimately always associated with a certain acceptance of risk. Of course, every investor has to find the right individual measure for himself.
Ways out of the low-interest trap
“In order to beat inflation in the current low-interest environment, one has to switch to more promising investments such as securities and funds,” explains Maschio, “because classic savings result in a loss of purchasing power. Investors should take inflation into account in their investment decisions and above all maintain purchasing power as an investment objective. It is important to have active management across all asset classes in order to compensate for fluctuations and to take any appreciation from other asset classes with you,” says Maschio. UniCredit Bank Austria focuses on objectivity and advises its customers according to the principle of “open architecture”. This means that the best individual solution can be the recommendation of an in-house product, but also of one of the 11 fund partners. The investment fund products of these fund partners are selected by the Bank Austria Premium Banking specialist team on the basis of the Bank's own market opinion in accordance with a multi-stage process and differentiated quality criteria.
Cautious-optimistic investment opinion
“Basically, our investment opinion can currently be described as 'cautiously optimistic',” says Rosen-Philipp. “Our equity quota is set at 'neutral', i.e. we have neither overweighted nor underweighted equities. Slowing but still positive growth, central banks in accommodation mode and yields in core countries at extremely low levels create a favourable environment for the stock market. “
Monika Rosen-Philipp continues: “Nevertheless, there are a number of trade and geopolitical uncertainties, which is why we are currently acting somewhat more cautiously. In our opinion, the current low yield levels for bonds offer hardly any opportunities for further price increases. In principle, we expect yields on bonds in the core countries to show a slight upward trend in the medium term, even if these are likely to be rather subdued due to economic uncertainties and a lack of inflation expectations. Overall, despite our cautious stance, we believe that equities offer better opportunities than bonds. “
The Preferred Partner Concept of UniCredit Bank Austria
The investment fund products of the eleven fund partners (Allianz, Amundi, Black Rock, DWS, Fidelity, Goldman Sachs, Invesco, J.P. Morgan, PICTET, PIMCO and Schroders) are selected by the premium banking specialist team according to a multi-stage process and differentiated quality criteria. The international fund research team has profound know-how and continuously monitors the funds, which have been awarded the "best in class" prize.
In addition to the analysis of risk and return figures, direct contact with fund managers is particularly important. In cooperation with selected fund partners, the research team receives first-hand fund information that is essential for the high-quality selection process. Each individual consultation as well as the wealth management and the service model UNIVERS EXCLUSIVE are based on this tested fund universe.
UniCredit Bank Austria Press Office
Volker Moser, Tel.: +43 (0)5 05 05-52854;