The Global CIO Office releases its 2020 outlook entitled “A World in Transition”
The Global CIO Office has released a report focusing on the year ahead for the firm, as well as highlighting the trends that are shaping the next decade.
Gary Dugan, CEO, The Global CIO Office, said “Geopolitical issues will remain a significant driver of market sentiment and returns in years to come. Millennials are taking over from Baby boomers as the key cohort in the workforce and electorate. Hence, we expect the development of more left-of-centre governments and a much greater emphasis on ESG issues”.
The report highlights the challenges of the waning dominance of the United States in the global economy and the uncertainty it will bring to financial markets.
Although the Global CIO Office have their doubts about the strength of global growth, with the US economy growing at no more than 2% per annum over the long term, as reported to be the case in a press release on January 8th 2020, they believe that central banks will provide ongoing substantial support.
Johan Jooste, Managing Director, The Global CIO Office, said “We believe that the great experiment of what’s termed the ‘New Monetary Theory’ whereby central banks fund will anchor interest rates at very low levels and fund significant government spending.”
The Global CIO team see ample opportunity to generate income streams of acceptable quality in global credit markets. Despite spreads being at their recent lows, they see scope for even lower spreads due to the weight of liquidity. “A non-recessionary outcome for 2020 should be broadly supportive of the emerging market debt in particular,” commented Jooste.
Regardless of the CIO team’s reservations about valuations and the outlook for growth, they believe that equity markets could still post reasonable returns in 2020. In particular, they think that UK equities can close the gap in performance that has opened in recent years.
“We believe the growing certainty about Brexit and a trade deal and the benefit to the economy from a fiscal boost will propel UK equities to some strong outperformance,” comments Dugan.
A feasible strategy for investing for income could be dividend-focused strategies outside of REITs, as many markets have equities paying out higher yield than government bonds. “By combining these with a selection of investment-grade and high-yield bonds could, sensibly picked, should continue to deliver the income streams that global investors have seen in 2018 and 2019,” said Jooste.
Writing before the Iranian crisis of recent days, the team were very constructive on gold. “We urge investors to take out the insurance policy against untoward issues in the near term and long term. A world of declining real rates, currency devaluations, trade disputes, tensions in the Middle East and debt levels showing no bounds is a world made for gold and silver.”
The Global CIO Office is constructive on Singapore assets. The team believe that a receding of the US trade dispute with China could propel excellent performance from Singapore equities. The high dividend yield and the heavy weighting of REITs in the index could be attractive to income-seeking investors.
The Global CIO Team highlight selective opportunities in the commercial real estate market. They are positive on European commercial real estate. They see opportunities to invest in buildings with yields sometimes as high as 7%. They remain cautious on residential real estate around the world given the unaffordability of many markets for those with middle incomes.
Latest News
Recommended news