Global Investment Committee Outlook 2020

Investing is never easy, especially these days, as internal political factions and international relations are so divided and yet so important to predict. That said, despite all our stress and complaints, prior generations would say that relative to their experience, we actually live in calm and prosperous times. Moreover, the expectation of low inflation in goods and services prices is keeping interest rates low, which makes large government and corporate debt manageable, while new technology and hard work keeps global productivity high (likely much higher than the official statistics indicate), which supports overall corporate profits and the average human’s livelihood.

Certainly, since the summer of 2018, the trade threats and actions by the Trump administration, mostly against China, have damaged corporate confidence globally and, thus, led to a slowdown in the global tech cycle. China’s economy has been affected by such and softened even more due to tighter enforcement of lending regulations in certain important sectors. This, in turn, has impacted the European, Japanese and Asia ex Japan economies and corporate profits, in particular. The US economy, especially capital expenditure, has also recently slowed.

However, it does seem quite clear that we are on the cusp of improvement in these factors. China and the US seem willing to compromise for a trade deal, while increased 5G investment and the structural rebound of cloud-server demand should support the tech sector. Recently, China also seems willing to support its economy to a larger degree. Meanwhile, several geopolitical uncertainties, including Brexit, now seem less frightening, but the greatest unknown is what will happen with the US elections, as the market seems to be far too confident about Trump remaining in power and avoiding a more anti-business president. While we take no sides politically, the stock market certainly does, and even if a moderate Democrat wins the presidency with a split Congress, there is much he or she can do via executive orders and regulations that will make corporations much less profitable. Economic growth forecasts would also likely decline. Even a moderate Democratic president would be strongly influenced by what is a much more socialistic tenor throughout the party, especially as such-tenored leaders would likely hold key cabinet positions. However, given what we presently know, the outlook for the presidential election is indeed likely tilted towards Trump’s return. New political information arises nearly every day that could sway key independent voters in the swing-states, so, coupled with all of the other international uncertainties extant, it does not seem wise to be overly exuberant about the global outlook.