According to the report: ”Profits Rise, Economy Slows, Globalization Peaks, and Business-as-Usual Investing Comes to an End”, BofA Merrill Lynch Global Research, (which was recently named Institutional Investor’s top research firm in the world), these keys highlights will be the trend for 2020.
The forecast is a mapping out of what to expect over the next decade and its analysts said that largely unchecked globalization, which ran roughly from 1981-2016, “is coming to an end.”
For its analyst these keys highlights will drive for 2020s:
- Stocks are expected to outperform bonds handily in 2020 as the global economy bottoms out in the first quarter, while monetary policy remains accommodative. The conventional idea of allocating 60 percent to equities and 40 percent to bonds is unlikely to survive into the 2020s.
- An interim, skinny U.S.-China trade deal should temporarily relieve trade concerns ahead of the U.S. presidential election and pave the way for a midyear, mini-boost in global growth led by U.S. rates and a weaker dollar
- A rebound in U.S. corporate earnings should spur a long-awaited uptick in capital spending and lift the S&P 500 to another year-end high of 3300, or 6 percent above current levels. In a reversal of trend, U.S. stock returns are expected to lag gains forecast for Europe and emerging market stocks next year.
Key macro calls made for the markets and economy in the year ahead are:
- Slowing global growth: Global GDP is forecast to slow from 3.8 percent in 2018 to just over 3 percent in 2019 and 2020. Europe should stabilize at around 1 percent, while a below-consensus call on China assumes growth slowing from 6.1 percent to 5.6 percent. Inflation is likely to inch lower from 3.1 percent this year to 2.7 percent by 2021 while policy rates remain flat and fiscal policy stays frozen.
U.S. economic slowdown despite strong fundamentals: U.S. GDP is expected to slow to trend, with growth averaging 1.7 percent over the next two years. On the positive side, inflation should be muted, with core PCE inflation at around 2 percent by the end of 2020. The Federal Reserve is not expected to take further rate action for the foreseeable future, unless a material shift in outlook triggers such a move. Given the Fed’s focus on avoiding a recession, the risk of further cutting outweighs hikes. Among others.
To read the full report visit: Bank Of America
Referring to this report, Summit News express: Although the forecast is full of trepidation, the fact that globalism is coming to an end and that we will begin to see the possible reversal of mass immigration should offer hope for many on the right.