Sam Phoen – Top 3 Investment Themes for 2020

December 20, 2019 By

Global Economic Outlook 2020

In this complex world of investments where trade ideas flip flop at the speed of a twitter post, it is extremely challenging to predict what’s going to happen next week, let alone next year. Irrespective of the fickle nature of the markets, there are several investment themes which in my mind are relatively clear, and here are my top 3 for 2020:

  1. As we all know, a Phase I US-China trade deal is signed in January, we should see the equities markets find solace. The running US equities bull will tempt underweight investors to jump back in, for FOMO*. An expensive market may correct, but seldom crash, when investors are underweight. When enough underweight investors throw in their towels and get at least back to equal-weight, that will be the time to raise our alert level. Until that happens, we have to stay invested in Equities. If one has to pick stocks, we prefer Tech stocks which have demonstrated ability to achieve increasing profitability, especially those in the US and China.
  2. The US Fed has signaled their willingness to watch developments before embarking on their next move. This relative calmness on rates front should provide sufficient comfort for fixed income investors to stay invested, especially with the fear of a correction in the stretched US equities at the back of their minds. China is not expected to cut rates by much to spur the economy, but will attempt to tweak targeted policies to help specific sectors which are negatively impacted especially by the trade war. We expect major fixed income markets to show resilience, and we will stay invested in it.
  3. Heading into 2020, we have US equities at new highs, with S&P500 rallying over 25% in 2019. This will not continue in a straight line. What is almost certain in my mind is an increase in volatility for 2020, in almost every asset class. The US-China Trade conflict will not go away in 2020, and we will also have to contend with the uncertainties in the US elections. This is a challenge to long-term investors, but also an opportunity for sharp and nimble shorter-term traders.

Sam Phoen
Senior Advisor, Dios Asset Management