Global Growth Investing: Our 2020 Vision

A Bright Outlook for Global Growth Investing?


By Brent Puff - First Quarter 2020

I think global equities may slowly improve in 2020 for three reasons:

  1. We believe the risk of a recession is lower today than it was at the beginning of 2019
  2. Global interest rates and inflation remain low
  3. We are starting to get clarity around some trade and political issues, such as Brexit

Find out how those three factors shape our outlook of the year ahead.


A Break in the Fog of Geopolitical Uncertainty

While there continues to be a fair amount of uncertainty leftover from 2019, we’re seeing sunlight break through in a couple of places.

Brexit

The worst-case Brexit scenario—an abrupt departure from the European Union (EU)—appears to be off the table. The UK Parliament voted in late January to formally leave the EU at the end of that month. Brexit now looks to be a managed, controlled departure, though both parties will still need to hash out trade deals by the end of the year. I think that’s positive; Brexit has been an overhang on the European economy and growth for a long time. The fact that the UK and EU are moving toward a more certain outcome should be a good thing for businesses and markets overall.

Trade Tensions

We’re also seeing some positive progress in the U.S.-China trade war. With phase one of a trade deal between the two countries signed, I think we’re in a better place than where we were three to six months ago. As my colleague Trevor Gurwich mentioned, resolving all the trade issues is going to take years. Importantly, however, I think both parties want to see progress. It’s in the best interest of President Trump, and it’s in the best interest of China to deescalate the situation.

Still Up in the Air: U.S. Presidential Election Outcome

As of now, it’s very clear that no one knows how the U.S. presidential election is going to pan out. With that said, if it begins to look like the election will create meaningful policy changes as a result of whomever wins, we will adapt. We’ll adjust our portfolios to address the changes and threats the election outcome creates.

Winds of Change for Non-U.S. Markets?

When you think about markets by geography, the U.S. has steadily and persistently outperformed non-U.S. markets for a long time. Yet I think non-U.S. market performance would see more benefit from a robust global growth recovery in 2020.

Markets outside the U.S. tend to be a little more cyclical—especially in Europe, where financials dominate markets. There are quite a few rate-sensitive banks that make up a disproportionate amount of European markets. Ultra-low and even negative interest rate environments have pressured those banks’ earnings. However, if growth starts to pick up and the rate environment begins to change, that could be a huge tailwind for many financial investments.

I think the financial sector overall is currently cheap, relative to others within the marketplace. That cheapness is largely a by-product of long-challenged earnings environment. But if that changes, financials could become a much more interesting opportunity.

Our Outlook is Sunny

In 2020, I think we’ll see a slow, steady improvement in the global economy thanks to very easy monetary policy and reduced trade risk. And when we take a step back to ask ourselves what that means, it’s our belief that the backdrop will continue to favor equities in the year ahead.

Our 2020 Vision

Get additional insights from our CIOs in the latest Investment Outlook.

The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

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