| Beyond the worst: The political shocks that derailed the upturn in global trade last year will likely retard global GDP growth by less in 2020 than in 2019. The US and China look set to sign an ambitious trade deal soon and Brexit uncertainty has receded. In addition, China continues to step up its stimulus. From a lower starting level, global trade and manufacturing can return to moderate growth in 2020 after bottoming out at the start of the new year. |
| Narrowing the gap: Across the western world, ongoing gains in real incomes and employment as well as low interest rates support private consumption and residential construction. Rising government spending is adding to that. We expect the gap between subdued cross-border trade and largely resilient domestic demand to narrow over the course of 2020. Trade can recover somewhat while healthy economic fundamentals and fiscal support keep domestic demand on track. |
| Some long-term costs: Even if growth recovers, some of the damage caused by narrow “my country first” policies in the last few years will be permanent. Amid elevated uncertainty, global trade in goods and economic exchanges between the UK and the European continent will never flourish quite as much as before. |
| The end of ever lower yields. In the absence of new political shocks that could hurt confidence and investment, the US Fed and the ECB will not ease policy further in 2020. The BoE may even hike rates in the second half of 2020. A gradual recovery in economic growth, a slight updrift in core inflation and a new readiness to raise public debt will likely underpin a modest rise in bond yields. |
| Some rotation into risk: While less depressed bond yields can contain the upside for equity markets, we expect some further rotation into cyclical sectors as risk appetites improve. With less demand for safe havens, the US dollar and the Swiss franc can lose some ground. |
| Risks – serious but not worse than usual: A surge in core inflation could force central banks to put an end to the post-Lehman upturn in global growth and global markets. The looming US election on 3 November 2020 will dominate the political headlines. Iranian turmoil could cause a brief spike in oil prices. Other risks such as Hong Kong, Turkey and Libya add to the mix. But none of these risks looks dire enough to make a major difference to our cautiously positive outlook for 2020. |
Holger Schmieding
Chief Economist
+44 20 3207 7889
holger. schmieding@ berenberg. com
Mickey D. Levy
Berenberg Capital Markets
Chief Economist US, Americas and Asia
mickey. levy@ berenberg-us. com
+1 646 445 4842
Kallum Pickering
+44 20 3465 2672
Florian Hense
+44 20 3207 7859
Roiana Reid
+1 646 445 4865
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