(Forbes) Sorry Bloomberg, there will be no recession in 2020, says yet another mega investment firm.
As CNBC star host Jim Cramer said a few months back when all the recession talk began, “it seems we in the media are the only ones talking about this.”
State Street Global Advisors (SSGA), the trillion dollar asset management arm of State Street Corporation in Boston, creators of those ETF “spyders”, said in their recently released 2020 market outlook that there’s no recession on the horizon despite months of headlines saying one was coming any day now.
“2020 is not a year of recession,” says Rick Lacaille, global chief investment officer at State Street Global Advisors. “We expect the global economic recovery to continue into 2020 against a backdrop of continued monetary easing, policy shifts and persistent pockets of resilience. Low inflation, robust consumer spending and a relatively strong global services sector combine to propel the cycle forwards. There are clear risk factors but overall, we expect world real GDP growth (to increase),” he says.
SSGA is looking at 3.4% GDP growth worldwide next year, up from an estimate of 3.2% in 2019.
U.S. GDP growth will slow from 2.3% to 1.9%, Lacaille is forecasting at this time. The eurozone, despite Brexit, is seen growing more next year than this year, hitting 1.3% if all goes well. The eurozone economies grew at a combined 1.8% in 2018.
Despite the U.S. economy holding its own, investors are finding it harder to find stocks priced to perfection.
“From a large index perspective, I suspect next year we will see more modest returns,” says Richard “Crit” Thomas, a global market strategist for Touchstone Investments. “We have pulled forward in 2019 some of the returns we expected in 2020. I think there will be a lot of noise because of the election, but I don’t think the markets will trade on that. We are going to be more interested in monetary policy and earnings growth to see if it warrants what we are paying for stocks.”
SSGA says the main risks expected to emerge on the economy are increasing geopolitical tensions and trade policy uncertainty. In this climate, choosing where to invest might matter more than pricing.
Some of the trigger points for a market slide and for a weaker-than-forecast economic picture include a worsening trade war, Brexit outcomes, and the potential for deeper political unrest in places like Iran and even Hong Kong.
Structural reforms in China and other emerging markets are expected to continue, lending a boost to capital markets and growth potential.
Closer to home, everyone will be looking at consumer resilience.
Positive outcomes in these areas might benefit Europe and emerging markets more than the U.S., which has less room for improvement, SSGA analysts believe.
Earlier this week, London-based asset management firm, Schroders, said they were not penciling in a recession next year.
Chief economist and strategist Keith Wade said his call was based on a trade war truce, and a phase one trade agreement, which now looks less likely than it did when he published his view on December 2.
Commerce Secretary Wilbur Ross hinted this week that China tariffs are on the table for December 15.
If so, investors will be counting on Fed support to keep the animal spirits alive on Wall Street.
Growth remains subject to the U.S. and China “sidestepping substantial risks” in the trade war to maintain momentum, SSGA analysts warned.
