First up, December 16:
Mike Pyle
Global Chief Investment Strategist for BlackRock
Changes to our investing views for 2020
We have made meaningful changes to our
tactical asset views heading into 2020, including a moderate tilt into
cyclical assets. Mike explains.
Two dueling forces have shaped asset performance in 2019: the protectionist push and a dovish pivot in monetary policy. The latter won out for risk assets, fueling multiple expansion in equities and helping send bond yields to historic lows. What do we expect in 2020? The three new themes we introduce in our 2020 Global outlook point to a big change in market drivers, with an expected manufacturing-led growth uptick painting a better backdrop for cyclical assets.
This year’s major market drivers appear to be behind us. We see less room in 2020 for dovish monetary policy surprises, and the U.S. and China have strong incentives to hit pause on their trade conflict across 2020, though there may be turbulence along the way. We see growth now taking the reins as the driver of risk asset returns. Our base case is for a mild growth pickup as easier financial conditions start filtering through and sideways protectionist pressures give global trade activity some breathing room (our “growth edges up” theme). We see this backdrop — coupled with what appear to be reasonable valuations across equities and credit — paving the way for modest returns in global risk assets. Our estimate of the equity risk premium (ERP) — or the expected return of equities over the risk-free rate — shows that the ERP still looks relatively attractive in a long-term context, as evident in the chart above. This supports our modest tilt into risk for 2020.Going back to December 10:
The case for cyclicals
We have moved to a moderately more cyclical posture, from the more defensive one we took in our midyear 2019 outlook. Cyclical assets have severely underperformed in recent years. We believe a firming in global trade and capex should pave the way for stronger performance of cyclical assets, such as Japanese stocks, emerging market (EM) assets and high yield bonds, over a 6-12 month tactical horizon....MORE
Why should you read our 2020 Global outlook?
And December 3:
Taking stock of our 2019 views
