Download the Schwab app from iTunes®Get the AppClose

2020 Global Market Outlook

Click to show the transcript

JEFFREY KLEINTOP: What was surprising about 2019 is that every major asset class produced above-average returns. It almost didn’t matter what your investment strategy was over the past year. You killed it. Congratulations.

We saw cyclical investments, those that tend to do well when the economy is accelerating like stocks and commodities, do very well alongside more defensive assets, those that tend to do well when the economy is not performing well like gold or government bonds. Very unusual to have both cyclical and defensive assets perform well in the same year. In fact, it’s never happened before, and I think the reason for that is what central banks were doing.

Back in 2018 they were hiking interest rates. Well, in 2019, they cut interest rates, and you can’t fight the Fed so all those major asset classes performed well. But now they’re on hold, and we’ll need new heroes in 2020 to drive the markets higher, and those new heroes could come in the form of trade deals and fiscal stimulus. Now, by trade deals, I don’t just mean between the U.S. and China. I also mean between the U.S. and Europe, and the U.S. and the U.K. Those will be important deals that come to the forefront in 2020, and maybe that will be enough to turn around the direction of business spending and enough to support jobs, which have been very important in keeping the consumer on track this year, really providing the sole basis of support for the global economy.

And by fiscal stimulus I mean new tax cuts and spending initiatives by governments. We’ve heard from about a dozen governments over the second half of 2019 talking about their 2020 budgets and stepped up increases in spending from governments like Japan, even Germany; and we’ve heard a lot from India as well so it’s really around the globe. Kind of similar to what we saw in 2018 in the U.S. with those tax cuts.

If we do see global economic growth reaccelerate, that could lead international stocks to outperform. They’re a bit more economically sensitive, they have much lower valuations, and we can see all that come together to drive international outperformance for the first time in a number of years. Thanks for watching.

Jeffrey Kleintop discusses interest rates set by central banks, trade deals, fiscal stimulus, and the implications these variables could have for global economic growth. If that growth were to reaccelerate this year, it could lead international stocks to outperform for the first time in a number of years.

What you can do next

Important Disclosures

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Please note that this content was created as of the specific date indicated and reflects the author’s views as of that date. It will be kept solely for historical purposes, and the author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions.

Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

Investing involves risk including loss of principal. International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Investment value will fluctuate, and bond investments, when sold, may be worth more or less than original cost. Fixed income securities are subject to various other risks, including changes in interest rates and credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.   High-yield bonds and lower-rated securities are subject to greater credit risk, default risk and liquidity risk.

Commodity-related products, including futures, carry a high level of risk and are not suitable for all investors. Commodity-related products may be extremely volatile, illiquid and can be significantly affected by underlying commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions, regardless of the length of time shares are held.

Diversification and asset allocation strategies do not ensure a profit and cannot protect against losses in a declining market.

The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party.

©2020 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC (0120-0JPN).

(0120-0JPN)

Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.