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2020 Market Outlook: Global Stocks and Economy

Key Points
  • Recession in some countries is possible, as headwinds from the trade-led slump in output and investment are having unequal impacts around the world. A broad global recession could occur if the manufacturing slowdown spreads to jobs and consumers.

  • An end to the U.S.-China trade war would help, potentially reversing business uncertainty and unleashing investment.

  • Government fiscal policy—such as tax cuts or increased spending—may become more important as central bank monetary policy has become less effective in boosting economic growth.

New heroes are needed 

International stocks’ double-digit gains for 2019 may be attributed to central bankers’ actions, but trade deals and fiscal policies may be the real heroes in 2020.

As central banks shifted to interest rate cuts in 2019, investors drove up valuations for international stocks, believing that these “Guardians of the Economy” could defeat any threat to global growth. In 2020, growth may depend on comprehensive trade deals and fiscal stimulus to reverse the slowdown in manufacturing and business investment. If tariffs are not lifted before businesses cut jobs, it may undermine the consumer spending supporting the world’s economy.

Manufacturing-focused economies, like Germany, are at the leading edge of the slowdown. This may lead to fiscal stimulus, with an increasing number of leaders already announcing new tax cuts and spending initiatives in their 2020 budgets.


International stock valuations are below long-term averages, reflecting 2019’s lackluster global growth and fears of potential weakness ahead. As international stocks tend to be more economically sensitive than U.S. stocks, they may offer more upside potential should growth reaccelerate.

Compared to the past 20 years, global stock markets are now less synchronized with each other, suggesting a globally diversified portfolio may provide effective management of market volatility.

A yield curve inversion can be a negative market signal, as it has often—but not always—preceded global recessions. As importantly, it also has signaled trend reversals in relative performance of global growth and value stocks, international large- and small-cap stocks, as well as U.S. and international stocks. In 2020, new leadership by value, large-cap and international stocks may follow 2019’s inversion.



  • Unless global growth reaccelerates, international stocks may remain stuck within the volatile ranges seen during the past two years, given their high sensitivity to economic conditions.
  • Global stock markets currently are less likely to move in tandem than they did in the past. This lower correlation may make broad global diversification across long-term allocation targets more rewarding than holding a narrowly focused portfolio.
  • Consider rebalancing back to long-term asset allocation targets. Historically, long-term asset class trends have tended to reverse following yield curve inversions—that is, when short-term yields are higher than long-term yields—as happened in 2019.

What You Can Do Next


2020 Market Outlook: U.S. Stocks and Economy
2020 Market Outlook: Fixed Income

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.

Forecasts contained herein are for illustrative purposes, may be based upon proprietary research and are developed through analysis of historical public data.

All expressions of opinion are subject to change without notice in reaction to shifting market or economic conditions.

Data here are obtained from what are considered reliable sources; however, their accuracy, completeness, or reliability cannot be guaranteed. Supporting documentation for any claims or statistical information is available upon request.

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.

Diversification and rebalancing strategies do not ensure a profit and do not protect against losses in declining markets. Rebalancing may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events may be created that may affect your tax liability.

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

Indexes are unmanaged, do not incur management fees, costs and expenses and cannot be invested in directly. For more information on indexes please see

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.


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