+1 Added to my documents.
Please be aware your selection is temporary depending on your cookies policy.
Remove this selection here

2020 Investment Outlook - Be agile to cope with diverging scenarios



2020 Investment Outlook








Pascal BLANQUE - Vincent MORTIER

Letter from the CIOs

After enjoying stellar performance this year, moving into 2020, investors will increasingly ask whether the global economy will proceed towards a trade war-engineered recession or whether growth will stabilise at a low level and potentially rebound, meaning the cycle could extend even further. In our view, the retreat in global trade is causing a major change in the structure of growth, but does not point to a full-blown recession, especially at a time when cumulative loose policies are gearing up and a partial deal between the US and China is in sight. Monetary and fiscal policy combination, a prominent theme going forward, may extend the current cycle further. While the noise on trade-related issues will be high, a material escalation is unlikely given the upcoming US elections in 2020. However, the path for investors will not be linear. In the short term, market expectations for policy actions have gone too far and need to be adjusted. The adjustment process will drive volatility in bonds, with a bottoming out of core bond yields having already started, and re-rating in some expensive defensive sectors in equity. Beyond the short term, the trend is towards a more aggressive policy mix that could potentially reach “the next level” of unorthodox measures when the risk of recession intensifies. The result will be an extension of the credit cycle that could eventually end in an explosion, although it is unlikely to happen next year. In terms of investment strategy for 2020, instead of fearing a global recession, investors should focus on adjusting their portfolio exposure to the deglobalisation trend. They should also prepare for a mature and extended credit cycle, with higher liquidity risks.

Against this backdrop, we envisage four main themes for investors.

Equity investing for 2020 will be, in our view, a story of income and opportunities for a potential upside. The lack of strong directional trends in the markets will continue as long as earnings growth remains weak. This should drive investors to search for areas of resilience in equity income/dividend space. Once the outlook stabilises, and yields bottom out (Purchasing Manager Indices rebound, some fiscal expansion), there could be some potential for a continuation of the bull trend, with opportunities for cyclical stocks (quality in Europe, value in US and small cap).

In fixed income, it will be a matter of optimising the search for yield, with selection and flexible strategies. The hunt for yield remains a key theme. However, crowded areas and liquidity risk persist and require a deep dive into credit opportunities. For investors with the appropriate time horizon, high yield will remain attractive amid a benign default outlook. Higher scrutiny at sector and security levels will be vital to avoid unsustainable business models. Emerging markets bonds are also attractive for yield hunters, with a preference for hard currency, while opportunities in local currency could materialise during the year. On the core fixed income component, a flexible and diversified approach is recommended amid higher expected volatility.

In emerging markets, new themes will appear from a more fragmented world and a retreat in global trade. Investors will have to go beyond the traditional “global” EM concept and dig deeper to capture attractive opportunities and themes. Among the latter, we favour the “help yourself” countries that have strong domestic demand and are less exposed to external vulnerabilities. Alternatively, themes such as the Silk Road will deserve increased investor attention, in our view.

Finally, investors should start building volatility-proof portfolios. Volatility has been constrained by the proliferation of some investment strategies (i.e., selling volatility to get premium), but as market expectations adjust, volatility spikes are likely. To volatility-proof their portfolios, investors should consider liquid alternative strategies that offer low correlation versus traditional asset classes, as well as volatility strategies.



Five global themes drive our central and alternative scenarios1

Global Themes


Investment Convictions2

Investment Convictions




1 - Important information: The views expressed regarding market and economic trends are those of the author and not necessarily Amundi, and are subject to change at any time. These views should not be relied upon as investment advice, as securities recommendations, or as an indication of trading on behalf of any Amundi product. There is no guarantee that market forecasts discussed will be realised or that these trends will continue. These views are subject to change at any time based on market and other conditions and there can be no assurances that countries, markets or sectors will perform as expected. Investments involve certain risks, including political and currency risks. Investment return and principal value may go down as well as up and could result in the loss of all capital invested. This material does not constitute an or er to buy or a solicitation to sell any units of any investment fund or any service. Amundi is a trading name of the Amundi Asset Management S.A. group of companies. Unless otherwise stated, all information contained in this document is from Amundi Asset Management and is as of 30 October 2019. Source: Amundi Research, as of 31 October 2019.

2 - Source: Amundi Research, Bloomberg. Data as of 30 October 2019. Equity chart: data refers to the dividend yields of the MSCI Index and MSCI High Dividend Index for each region. Bonds chart: data refers to the index yield to worst and duration. Indices used are German Govt Bonds = JP Morgan GBI Germany Index; US Govt Bonds = JPMorgan GBI U.S. Index; Euro IG Bonds = Bloomberg Barclays Pan European Aggregate Corporate; U.S. IG Bonds = Bloomberg Barclays U.S. Aggregate Credit; Euro HY bonds = Bloomberg Barclays Pan-European High Yield ISMA; U.S. HY Bonds = Bloomberg Barclays U.S. Corporate High Yield; EMBI Div = JPMorgan EMBI Global Diversified Blended; CEMBI BD = JPMorgan CEMBI Div Broad Composite Blended; CEMBI BD HY = JPMorgan CEMBI Broad Div High Yield; Euro Corp Short Term = Bloomberg Barclays Euro Corporate 1-3Yr; U.S. Corp Short Term = Bloomberg Barclays U.S. Corporate 1-3Yr; EMBI Short Term = JPMorgan EMBIG Diversified 1-3Yr. Emerging markets (EM) chart shows Amundi Research forecasts. Portfolio construction chart shows the number of extreme events (weeks when the S&P500 moved above two standard deviations from the long-term 1969-2019 average) on a rolling basis. Notes: The MSCI information may only be used for your internal use, may not be reproduced or disseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indices. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties of originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. ( www.mscibarra.com ). Indices are unmanaged and their returns assume reinvestment of dividends, and unlike actual portfolio returns, do not reflect any fees or expenses. It is not possible to invest directly in an index. 


BLANQUE Pascal , Group Chief Investment Officer
MORTIER Vincent , Deputy Group Chief Investment Officer
Send by e-mail
2020 Investment Outlook - Be agile to cope with diverging scenarios
Was this article helpful?YES
Thank you for your participation.
0 user(s) have answered Yes.