Page 11 - ISQ UK JANUARY 2020

JANUARY 2020

2020 International Outlook:

The Prospects of Positive Progress

Chris Bailey, European Strategist, Raymond James Investment Services Ltd.

A recent asset allocation study suggested that, over the
last ten years, a portfolio with maximized risk-adjusted As we enter a new decade, it is high time to reevaluate
returns would have been fully allocated to US equities.* US-centric positioning.

Since the end of the global financial crisis, the US market has
indeed been the standout. Other markets around the world
remain its poorer cousins. Yet, as we enter a new decade, it is DOWN, BUT NOT OUT
high time to reevaluate US-centric positioning. There is change is in the air in the eurozone. Not only have new
appointments been made to the top of the European
Lower earnings multiples, higher dividend yields, and an Commission (EC) and European Central Bank (ECB), but the
overvalued US dollar are, on their own, insufficient reasons dwindling of German Chancellor Angela Merkel’s political clout
to invest abroad. The catalysts that will cause international has created a vacuum (which has only been partially filled by
markets to roar back to recovery will be found in bona fide President Macron of France). Whilst political crisis often appears
developments. With that said, can we be truly positive about only a short step away in the eurozone, the message that
the prospects in Europe, Asia, and elsewhere around the members are stronger together has seemingly stayed the hand
world for the upcoming year? Certainly, the global trade of populist political parties. Expect new ECB President Christine
tone will be heavily influential (especially with most Lagarde to lobby regional governments more successfully than
international economies more open and, hence, dependent her predecessor for greater use of fiscal policy levers. However,
on trade than the US). While any trade angst is unlikely to be as Japan has demonstrated, such actions are not a standalone
a helpful backdrop either in the US or abroad, the prospects solution. The eurozone still needs to decisively, and
of positive progress remain encouraging.
dynamically, enter the competitive global economy of the 21st
Outside of trade matters, what else can we discern? Let us start century. 2020 is likely to be another transitional year, and,
our global tour away from America in Europe. fortunately, expectations are low (as shown by the
preponderance of negative-yielding government bonds and
recent quantitative easing policy extension).

*Bank of America Monthly Fund Manager Survey 10