My mailbox has been filled with end of year outlooks. Some are short and very general while other are quite long and detailed. Some are just wordy overviews of what to expect while others have a large number of supporting data and graphs. Most this year are surprisingly the same.
Global economic growth will pick-up albeit still muted. Asset performance will be positive but lower after the wildly successful 2019. Non-US stock markets should improve on a relative basis and equities will still outperform bonds. These forecasts can all be condensed into the simple comment the financial world will be normal without too much excess either positive or negative. If you believe in long-term risk premia, the market will behave as expected. There are some cautious comments but without much specificity.
The status quo forecast, for example, requires some of the following conditions:
- Strengthening or stable PMI
- Improved manufacturing growth and trade
- No further trade wars rhetoric or action
- No geopolitical surprises
- No BREXIT surprises
- No election surprises (policy changes)
- Continued stable volatility
- Increased earnings or increased equity valuations
- Continued China growth
- Stable Fed policy and "Powell Put" if markets sell-off
- Inflation surrounding the 2% corridor
- Continued liquidity from other central banks
- Leverage debt slowdown