Equity and real estate will be attractive in 2020
The managing director of nowinta Spain, Tobias Heyden, comments in this news blog on the development of the financial markets in 2019 and the prospects for the current year.
Investors enjoyed 2019 – despite the trade dispute, economic weakness or rising debt. Thanks to the expansionary central banks and interest rate cuts in the USA, low to negative interest rates, which make dividends attractive, and positive earnings momentum, especially in the technology sector. The MSCI World Index, which includes more than 3,000 companies from industrialized and emerging countries, rose by 25 percent. The American S&P 500 climbed by almost 30 percent and the stock index (DAX) achieved an increase of 26.2 percent.
Bonds have also made a positive contribution due to the interest rate cuts and thus rising prices. Customers of nowinta Asset Management enjoyed a very positive return in 2019; despite a considerably lower risk than equity markets a balanced investment strategy (50 to 60 % shares) has achieved an excellent 17,34 net performance. The strategy is globally designed based on GDP Figures and broadly diversified by investing via exchanged traded funds.
In the first half of 2020, in my opinion, there will be a turnaround in the real economy, i.e. the manufacturing sector, triggered by the accommodative monetary policy of the central banks in 2019, which will have a delaying effect on the real economy. Global purchasing manager surveys show signs of stabilization and are rising again after their seven-year low in July 2019. These improvements make accelerated growth in the global economy likely and will particularly benefit investments in emerging markets. In 2020, however, there is little scope for further monetary easing measures and it will be necessary to concentrate on the economic fundamentals. Due to the low or even negative interest rates, many government bonds can no longer effectively contribute to the stability of the portfolio. Alternatives for diversification should therefore be considered.
The main risk for both capital markets and the real economy is that the US and China cannot agree on a trade agreement and the protectionist stance is tightened. This would lose confidence and jeopardize the upswing. However, with presidential elections to take place in the U.S. in 2020, I expect President Trump to work to find a mutually acceptable solution because both he and his clientele are interested in positive developments in the financial markets.
The bottom line is that you should also be invested in 2020, because on the one hand the spectre of recession seems to be subdued and on the other hand interest rates remain very low, central banks are expansionary and dividends are more attractive compared to money market yields. That is why investments in real values – i.e. stocks and real estate – still make sense.
The nowinta investment strategy starts right here. Thanks to global diversification based on GDP figures and via Exchange Traded Fund, our customers invest in around 2,500 companies worldwide and thus participate in the development of the global economy. In order to control the risk, we use various strategies with a larger or lower percentage of equity to meet the customers’ need for risk mitigation.