Global Markets Newsletter – January 2020
The new decade kicked off in an upwards style for US markets, achieving new high levels. The recent Crisis between the US and Iran increased the risk and market volatility coupled by deadly Corona virus. Companies realized profits in 2019 expected to be published over the following weeks, which in turn are expected to further fuel the markets.
In the US 2020 is an election year and equities are expected to perform well, as Republicans are determined to win the elections versus Democrats. On a macro level, GDP is at 2.1%, interest rates at 1.75% and inflation at 2.3%.
In Europe, markets underperformed the US, mainly due to fears that recovery is not imminent. Nevertheless, there are opportunities for positions in the event of market corrections, but low inflation and marginal consumption do not provide the leeway for Central Bank (ECB) to increase rates, even for psychological reasons. However, 2020 is expected to be a positive year with medium to high volatility.
Brexit is underway and Great Britain may soon enter a recovery phase, following the initial market and currency shock.
In Greece, bonds had a positive month, especially after the new issuance of the 15-year government bond, which attracted €2.5bln from the capital markets with a yield to maturity of less than 1.9%.
The EUR/USD moved in favour of the dollar and is expected to continue as the European currency hardly justifies the economic stagnation. The 1.08 area is the next target and is expected to be reached by the time of coming elections, should there be no further geopolitical turbulence.
Preference weighs on the US equities versus the European ones (0 positions). Government Bonds have marginal returns, while Corporate Bonds bear higher risk to meet their potential return. US Equities are the 80% of the total portfolio, of which the technological sector comprises 60%. Cash is retained at increased levels, as corrections are often buying opportunities.
US Manufacturing – Finance and Insurance (Source: Bloomberg)
Euro-Area Inflation (Source: Bloomberg)
EUR/USD (Source: Bloomberg)
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