In 2019 all segments of the capital markets showed performances well beyond expectations at the beginning of the year and it was one of the best years for investors.
The year 2020 will be mainly influenced from the US presidential elections. Since the democrats are in the midst oft he primaries and no clear frontrunner has emerged the effects on the markets are still open. In the 2nd half 2020 this will be the main driver for volatility in the markets.
The economic situation is one of a soft global economic growth. This is coming from various sources. On the one hand the tariff conflicts of the US with China and the EU which are negative for the industrial sectors, on the other hand is the German industry facing the challenges of the energy changes, esp. in the car industry.
The monetary policy is still accomodative, even if the new ECB head Christine Lagarde has announced a strategic review. This monetary policy is very supportive for the economies. The negative interest rates in the Eurozone will also help to overcome the economic obstacles.
This mixture of low growth, political uncertainty and supportive monetary policy will be the main drivers for this year. The outbreak of the Corona Virus shows that unexpected events all of a sudden can change the sentiments and send markets downwards in some sectors of the world.
Due to the high valuations in the bond markets and the still low interest rates seems a replications oft he performance of 2019 not probable and we will have to expect a more subdued development. The volatility will increase in the 2nd half of the year.
Member of the Management Board
Allianz Investmentbank AG
CIO Allianz Group Austria
10 February 2020
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