21.01.2020

What to expect in 2020?

For most investors, 2019 turned out to be a great year. Interest rates, which once again dropped sharply during the year, were the driving force behind these excellent results. The most important reference points in 2019 were:

· The German 10 year Bund dropped from +0,2% to -0,3%
· The US 10 year Treasury Bills dropped from +2,7% to +1,8%

Not only did this result in a world-wide rise in bond prices, it also led to a strong price appreciation in cash-flow rich investments. Especially companies generating strong positive cash-flows.

Markets has performed well in this climate. Especially towards the end of the year. For many investors, the multitude political issues and macro-economic uncertainties, refrained them from investing. However, we now finally see an end to the ever-lasting Brexit saga, with a clear victory for Boris Johnson, and also a positive outcome in the many protracted trade wars between the US on one side and China, Mexico and Canada on the other side.

What to expect in 2020? The stars are currently favourably aligned. With the ebbing away of several major concerns, as described above, a possible strong recovery in the European economy looms at the horizon.

In Europe, there is, once again, mention of fiscal stimulus for the economy, as has been the case in the US and China for many years already. We find us, thus, in an environment where the global economy is supported by low interest rates in combination with fiscal stimulus. If a strong rise in inflation can be avoided, this environment will, more than probably, remain favourable for your investments. The largest external risk for the coming year, might well be the US elections. A victory for a candidate such as Elisabeth Warren, with an outspoken left wing agenda, will not be digested well by the financial markets.