Global economic growth is expected to pick up in 2020 thanks to easy financial conditions while the US/China trade tensions are heading into a “relatively calmer period” as both sides might be driven by their own self-interest, according to BlackRock.
Further to that, the next year might see economic fundamentals driving markets, with less risk from trade tensions and less scope for monetary easing surprises of fiscal stimulus.
According to the firm’s 2020 outlook, major central banks would intent on maintaining easy policies, with interest rates and bond yields looking likely to linger near lows.
Asked whether the global markets should expect recession or recovery in 2020, BlackRock’s chief investment strategist, APAC, Ben Powell said: “We don’t see a recession in the US or globally in 2020 and we would be in a recovery camp.
“It’s true that policy will be amongst some of the major developed markets central banks on pause but the benefits of the cuts from last year will flow through this year. Also, we think about the data particularly manufacturing but more broadly it is already started to pick up and the growth is going to recover.
Speaking on China, Powell stressed that the focus on US presidential election may mean a relative pause on the Chin tensions as it may be in the interests of both countries to have a more serene backdrop for at least the first half of 2020.
According to BlackRock, this should not confuse the underlying reality of the structural and persistent tensions, but may give risk some room to run.
“The idea that we have a relatively calmer period of time in the US/China trade tensions is obviously very important. But I do want to stress this is just a sort of temporary period of relative calm because, as I’ve mentioned, it suited both sides.
“However, looking forward we believe that the tensions between US and China are structural and persistent over the last there years and maybe even decades.”
The situation on the US/China front also helped BlackRock to take an overall moderately pro-risk portfolio approach, the firm said.
With the combination of growth picking up and looser financial conditions, the firm said it remained overweight equities over fixed income globally while merging markets (EM) debt was a high conviction long.