What to look out for in the financial year 2020
We believe the gradual slowdown in the global economy is set to continue, driven largely by the decline in the manufacturing sector as global trade flows soften. But strong labour market growth has supported consumer spending and we’ve observed some resilience from investors across the globe.
Inflation has been low globally, and most central banks are cutting cash rates. Markets are really not pricing in any chance of inflation returning, so if we were to see an upside inflation surprise, we might see prices for both shares and bonds head lower.
It seems likely that US and China relations will remain tense, and while we’re not giving up hope on a resolution on trade, we’re expecting volatility in markets will be with us for some time.
In Australia it does look as though house prices have stabilised, and with tax cuts and lower mortgage rates coming through, we’re expecting consumers to spend a bit more, which should help boost growth.
Overall, while we expect to experience ongoing risks to growth, lower interest rates offer some level of protection for investors. The world’s eyes are firmly set on China, where authorities have plenty of room to stimulate their economy and help spark a global recovery by mid-2020.