Cautious economic optimism for 2020

Despite the uncertainties of the past year, pundits generally seem to be expecting a global recovery by the second half of 2020.

In comments reflecting a general analyst sentiment of cautious optimism, Adrian Zuercher, APAC head of asset allocation at UBS Global Wealth Management’s Chief Investment Office, was reported in December as saying he expected global growth to recover in the second half of 2020.

While the economic environment was currently slow, Zuercher predicted a “significant recovery going into the second half of 2020, particularly in the fourth quarter.” Central banks around the world had moved back to printing money, expanding their balance sheets and lowering interest rates, which would all have a positive influence on the world economy, he predicted.

The Federal Reserve left interest rates unchanged in December and signalled it would stay on hold through 2020, effectively saying it would stay on the sidelines during the US election year. “Our economic outlook remains a favourable one despite global developments and ongoing risks,” said Fed Chairman Jerome Powell.

Morgan Stanley research analysts in December also forecast a recovery in global growth. “Easing trade tensions (the key factor in the global downturn) will reduce business uncertainty and make policy stimulus more effective,” the bank said in its global outlook for 2020. The firm projects global economic growth of 3.2% next year, compared to 3% in 2019.

However, in its recent Global Financial Stability Report, the International Monetary Fund stepped up its warnings about high levels of risky corporate debt.

CNN business noted that big tech stocks had remained popular in 2019, with companies such as Apple and Microsoft continuing to surge. But CNN quoted Jake Falcon, CEO of Falcon Wealth Advisors, as saying that these were also the stocks that had run up the most, and that it was taking some chips off the table.  

Lori Calvasina, head of US equity strategy at RBC Capital Markets, in a December report, predicted that financials, industrials and utilities should outperform because tech and other momentum stocks looked to be overvalued, especially since their future earnings growth forecasts were no longer dramatically higher than the expectations for value stocks.

One what can go wrong scenario came with the multi-billion dollar fiasco of the planned WeWork IPO. 

Last year saw the collapse of a number of venerable major US companies, such as PG&E Corporation and Sears. But one of the most fascinating stories of the year surrounded the unfortunately titled WeWork, which had sold itself to experienced tech company backer Softbank as essentially a co-working/real estate company with a new tech (and New Age)  spin.

However, the company was described by one commentator as more soap opera than tech company. It was forced to pull its IPO late last year once skittish investors read the prospectus and balked at its ongoing losses and corporate governance concerns.

The company went from a $US47 billion valuation to needing a bailout from Softbank, and WeWork’s co-founder and CEO Adam Neumann was paid multiple millions to step down.

Successful tech companies provide flexible software solutions that help businesses and workers to lower their operating risks and improve their cash flow. It’s always a good idea to do your due diligence and read the fine print.

About the Author

Richard is a seasoned credit expert, having spent his entire career working within the bureau and data world. He is passionate about helping companies find the best use of technology and data to improve their performance.

Richard Brooks
Product Expert, Australia & New Zealand