Strong end to 2019
The stock markets ended last year with a strong upturn in December. The economic growth is expected to continue in 2020, and the trade war appears to be heading towards a conclusion.
For the month, the US S&P 500 Index rose by 3.0 per cent measured in USD, while the European Stoxx 600 Index increased by 2.1 per cent measured in EUR and the Nordic VINX Index climbed 0.5 per cent measured in NOK. In Norway, the Oslo Stock Exchange (OSEBX) rose by 3.2 per cent. We have behind us not only a strong month but also a strong calendar year. For developed economies, 2019 was the year in which they achieved the best returns since 2013, the second-best returns in the past 20 years and the sixth-best returns since 1970. A lot of the upturn is attributed to the reversal of the correction towards the end of 2018, and the US central bank's interest-rate cut was also important.
Growth is continuing
The global GDP growth in 2019 appears to be somewhere between 2.5 and 3 per cent. This is slightly less than in 2018. At the beginning of 2020, the consensus is that global GDP growth will be slightly weaker than in 2019, driven by assumptions about lower growth in industrialised countries. Higher growth is expected in emerging economies, especially India, Brazil and Russia. Even with lower overall growth expectations, the global economy is continuing to grow.
The slowdown in global manufacturing attracted a lot of attention in 2019. Fears were linked to dismissals, followed by weaker consumption figures, but these did not materialise. Towards the end of 2019, we saw signs of the manufacturing figures bottoming out, although the signals, especially from the USA, were rather mixed. Leading global indicators, including figures for stocks and orders, continue to point upwards at the beginning of the new year and may indicate a reversal in 2020.
Trade agreement in sight
Despite a lot of talk about Brexit and other geopolitical factors, the trade war between the USA and China had the most significant market and economic effect in 2019. After a lot of sabre-rattling, the mood became more positive towards the end of the year. In December, the USA even chose to drop new increases in customs tariffs and reduced the customs tariffs that had been raised in September. In return, China will increase its imports of US goods and services in the future. The so-called "phase 1" agreement is due to be signed on 15 January. It remains to be seen if the ink will have a chance to dry.
The road ahead …
The new year has started with unrest regarding Iran and the USA. In the short term, this has clearly raised the oil price. The stock exchange year will probably contain a lot of surprises and fluctuations. Expectations regarding returns should probably also be calibrated against the upturn in 2019. At the same time, shares still appear to be the best alternative.
" Some people don't like change, but you need to embrace change if the alternative is disaster"