What’s the outlook for the economy and markets in 2020?


Markets will start the year on a strong note after tacit agreement was reached at the end of 2019 between the US and China over a trade agreement. This stabilised markets, alongside UK prime minister Boris Johnston’s landslide election victory, delivering him a mandate to finalise Brexit. These events bode well for economies and markets heading into 2020. Here we look at what’s on the cards for the next year.

Market outlook

Global investment house Credit Suisse believes the outlook for markets is optimistic. It expects Australian GDP growth to rise to 2.8%, supported by infrastructure investment and tax breaks for foreign firms prepared to invest in our large infrastructure projects.

The bank also thinks the RBA will further ease monetary policy. But it says the form it takes – further cash rate cuts or unconventional monetary policy – is uncertain.

Turning to global growth, Credit Suisse forecasts GDP growth to reach 2.5% in 2020 with a mild recovery in industrial production. It believes, “de-escalation of the trade war should reignite capital spending in the US and China, and Brexit should finally be put to bed”.

But it is concerned the 2020 US election could pose risks for international market, as, “the leading Democrat contender has strong views on regulating Wall Street and the breakup of big tech”.

In terms of other key measures, Credit Suisse says inflation may rise temporarily in the US, but the US Federal Reserve is unlikely to cut rates again, while US GDP growth should reach just 1.8%. It says, “limited earnings growth should translate into single digit returns for the global share market… overall, we enter 2020 optimistic, like we did in 2019. Returns will be lower than 2019, but nonetheless we see 2020 building on what has been a stellar year.”

Closer to home, AMP Capital chief economist Shane Oliver has a somewhat more circumspect view. He says, “share markets are still vulnerable to short term volatility around trade, Iran and US politics.”

Turning to property, Oliver notes the election outcome, rate cuts, tax cuts and the removal of the 7% mortgage rate test are driving a rebound in national average capital city home prices led by Sydney and Melbourne.

“But beyond an initial bounce which could run into the first half of next year, home price gains are likely to be constrained through this latest upcycle as lending standards remain tight and rising unemployment acts as a constraint.”

Overall, the year is starting on a positive note and it will be interesting to see how economies and markets perform throughout 2020.

The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate. Individual circumstances are different and as such require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.

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