Local and global insight keeps the client ahead of the curve

Despite a somewhat bumpy year for financial markets in 2019, we saw strong returns across all the major asset classes. Continued uncertainty, from Trump to trade and from Brexit to European politics, has delayed global investment and – against this backdrop – global growth moderated. However, overall investment performance showed remarkable resilience. This was due in part to many central banks loosening monetary policy in an attempt to offset the risks of a slowing global economy, the aversion or delay of some of the major risks facing the economy, as well as continued consumer strength.

Uncertainties persist moving into 2020

As 2020 begins, many of these uncertainties remain and they will undoubtedly continue to weigh heavily on global growth prospects. Perhaps the biggest risk to the world economy remains the tension between the US and China. Although there are positive signs of a deal being reached, we remain circumspect about market expectations of a rapid resolution to the dispute, with both sides keen to save face.

2020 also sees the US presidential election increasing uncertainty. In the UK, meanwhile, Brexit is far from resolved and although the prospect of ‘no-deal’ appears to have receded, political uncertainty remains. In addition, global tensions, particularly in the Middle East, continue to bear down on the global economic outlook.

Having said all of that, 2020 offers a number of positives. Households are benefitting from historically low rates of unemployment and pay growth that is outpacing inflation, while tax cuts have also been mooted. This is providing a boost to disposable income and helping to fuel consumer spending. The Service sector is proving resilient and corporate growth continues. We’re also seeing more positive action or reaction from the central banks, through either a continued loosening of monetary policy, or certainly a reluctance to tighten it, as they attempt to shore up growth.

Delivering the market insight that matters

Overall, whilst there remains an outside chance of recession, growth in 2020 is likely to continue –albeit somewhat depressed and fragile. Creating an investment strategy that helps you meet the opportunities of shifting global conditions and takes your personal ambitions into account, is where our local/global approach can make a real difference – for example, by giving you the facts (not the headlines) with timely advice on what action should, or shouldn’t, be taken.

The value of a globally diversified portfolio

Currently we think that the biggest risk in 2020 will come from an unexpected event rather than a severe economic downturn. At the moment, there are more candidates than usual that could trigger such an event. For investors looking to navigate through a period of heightened uncertainty, the most proficient approach is through a globally diversified portfolio. We have also identified four investment themes for 2020 that we believe are worth considering.

1. Looking for yields: We expect the main asset classes to return modest index gains in 2020, so a vital element of our investment strategy is to look for sustainable yields, either in equity or fixed income (notably emerging market fixed income) as well as cost-efficient alternative strategies.
2. Globalisation: Our preference remains for US and EM consumer exposure and to mitigate exposure to trade and supply chain-exposed companies, as we continue to monitor global events.
3. Monetary to fiscal policy: We see potential pockets of fiscal expansion, especially linked to green initiatives in Europe.
4. Time to hedge and diversify: Continued and heightened uncertainty means that assets such as gold and volatility should be used in a portfolio context to diversify away from risky assets.

Reviewing your investment strategy and formulating investment plans becomes even more important (and potentially more difficult) in times of volatility. Having an on-island presence lets us develop close relationships with our clients, building a partnership that gives us a deep understanding of what you want to achieve. It means we’re on hand to talk through the impact of global shifts on your investments, drawing on specialist expertise from sector and markets within the broader group and beyond. Combining the powerhouse of Barclays with the experience of our local teams creates an effective combination for our clients.

Please remember the value of investments can go down as well as up, and you may get back less than your original investment.

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