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14 Jan 2020

The Soaring Twenties: 10 Economic & Market Trends to Consider for 2020

Written by Speaker Nomi Prins | A new decade has arrived! And with it, the Roaring Twenties of a century ago echo today. That’s because the past can teach us lessons. Consider F. Scott Fitzgerald’s wife, Zelda. She eloquently summarized the excesses and red-flags of the 1920’s. “We couldn't go on indefinitely being swept off our feet,” she noted in her 1932 semi-biographical book, Save Me The Waltz. The book was published at the height of the Great Depression that followed the Crash of 1929.

The Fitzgerald’s epitomized the rise and subsequent fall of those times. If the bubbly (or in today’s world, central bank stimulation) stops flowing, the party ends and the cold morning after begins. That’s why investors, business leaders and entrepreneurs alike should be prepared for turmoil.

It is true that in 2019, the S&P 500 rose by 28.9 %, capping a record decade of stock market gains. Even gold, arguably a slow and steady play, saw a boost of 18.7 % last year. However, this was largely due to the Federal Reserve’s stimulus throughout most of the decade, and its more accommodative turn during its final year. Major central banks around the world followed that lead.

Questions are building in the chambers of Wall Street. Can this bull market last? And what does 2020 hold in the weeks and months ahead? There’s no doubt that central bank policy will remain accommodative and money cheap on an international scale. This will boost the stock and bond markets.

Yet, prospects for real economic growth the world over remain shaky at best and at worst, mired in a cannon of debt, trade tensions and geopolitical risk waiting to blow. That does not mean it is time to start hiding cash under the mattress. But approaching the year ahead with cautious respect can mean a sober and profitable outcome. Below are 10 pivotal areas that could drastically impact the global economy and markets as we launch into the Soaring Twenties.

10 Market Trends to Consider for 2020

1. The Fed Will Keep Things Loose – For Now

The Federal Reserve’s current stance is to keep rates where they are. However, the Fed has also indicated that it will continue using its latest cheap money tool - the repo market - to ensure that money will flow where it needs to. The Fed has promised to inject $60 billion per month into the markets, a practice it started last September. Its balance sheet ballooned to nearly $4.1 trillion from $3.7 trillion to close out 2019. The Fed won’t call this process quantitative easing (QE) – but, rest assured - it is.  The Fed may not move rates for the first half of 2020, but it will keep money flowing, which should give the overall market a bullish bias.

2. Sluggish Economies Will Crave More Cheap Money

Economic growth will remain lethargic. So, look for central banks throughout Asia, Latin America, Eastern Europe and Australia to take the Fed’s green light for easing money in 2019 a step further. This easing could take the form of more rate cuts or other means of injecting liquidity into markets. According to Central Bank News, central banks in developed economies cut rates 13 times in 2019. The largest four central banks have racked up a whopping $19.7 trillion in total assets over the last decade. In contrast, emerging market (EM) economies chopped rates 53 times, taking over center stage on rate cuts.  

3. Emerging Markets and Gold Will Beat the Dollar

EM stock markets could outperform their U.S. counterparts this year, barring isolated geopolitical or domestic unrest, even in the face of slow economic growth. This means the dollar could weaken against EM and other currencies, and gold could strengthen as a diversification measure.

4. It’s Boris’ Brexit Now

The UK under the leadership of Boris Johnson will stagger as Brexit negotiations continue. Look for the UK to face more snags while “exiting” Europe. Those snags could drastically impact the UK market and economy. The British pound could weaken relative to the Euro along the way. Meanwhile, UK banks will benefit from the certainty aspect of Brexit, but European banks will outperform because that certainty means more migration of banking services to the EU. Germany could become a truly global banking hub.

5. Corporate Bond Markets Will Expand

There will be more long-dated corporate bond issuance throughout the world, as borrowing costs remain low due to low rates. In addition, issuance will be driven by demand for long-dated returns from global pension funds, which are facing a potential crisis in the not too distant future.

6. Diversified Energy Sector Means Opportunity

U.S. oil supplies could shrink while Mid-East tensions rise, propping up oil prices. At the same time, climate change-driven green initiatives will grow throughout the natural resource industry. Opportunities in alternative energy investment will increasingly be a part of political, financial and environmental strategies. According to the International Energy Agency (IEA), renewable power capacity is set to jump by 50% by 2024, signaling more jobs and investments in the year ahead.

7. Easy Money Will Bolster Latin America

In Mexico, left-leaning President Andres Manuel Lopez Obrador (AMLO), facing his second year as president, is forging stronger alliances with business leaders on the back of momentum in the USMCA (read: new NAFTA) trade deal. This could make Mexico more attractive to external foreign investment. However, anemic growth could bring in more rate cuts from Mexico’s central bank. That combination will benefit the Mexican peso and Mexico’s stock and bond market.  In Brazil, a similar pattern could occur under right-leaning president Jair Bolsonaro.

8. Trade War or Peace Could Sway Markets 

China’s growth and consumer appetite could accelerate as long as the U.S.-China trade wars don’t worsen in 2020. While there will be hiccups in talks between the U.S. and China before signing Phase I and Phase II agreements, the current positive outcome trend offers significant opportunity. A firm trade deal could propel markets, global trade and economic outlooks in 2020. Still, trade wars are not over yet and issues ranging from Europe to Latin America could arise.

9. Inequality Remains Constant

Demonstrations and civil unrest will intensify as inequality increases due to fiscal policy choices, elections, and angst over money being concentrated at the top wealth brackets. According to a recent AP report, income inequality in America hit its highest level since the Census Bureau began tracking it more than 50 years ago. The wealth of the 500 richest people surged 25% in 2019. Meanwhile, an estimated 43.5% of all Americans are either poor or considered to be low-income earners. This phenomenon is global. As central banks continue to ensure that money pours into the financial system, that stimulus will remain in the hands of an elite few.

10. An American Election Will Shape the Decade – Just like the 1920s

U.S. elections will increasingly become the main focus of the American news cycle. Interim volatility triggered by polls and Democratic frontrunner status during the first half of the year will present both uncertainty and investment opportunities. The Iowa Caucus begins in February but the emergence of who will face President Trump could be left until July. This U.S. election cycle will be one that Wall Street and global economies will reckon with for years to come.

Ultimately, what all of this means is that a generally bullish market will be driven by global central bank support. As I explained in my last book, Collusion: How Central Bankers Rigged the World, in the wake of the 2008 financial crisis, emerging market countries saw their central banks remain largely on the sidelines. Fast forward to today, and nearly every major economy has seen its central bank assert itself into cheap money creation mode. Emerging market central banks have now jumped on that bandwagon.

The bailouts that banks received in 2008 and the artificial stimulation they still have today has left the world in a great divide. What we have seen as a result is an elevated rise in nationalism and uncertainty as was the case a century ago. Most citizens, voters and principled investors remain starved for policies that spawn real sustainable infrastructure, incite organic wealth distribution, and stabilize economies above financial markets.

While the 1920’s appeared booming on the surface until the Crash of 1929 killed the buzz, this time around we may not be so lucky. Inequality, debt, slow economic growth and geopolitical tensions remain, even as cheap money will lift financial markets. Approaching 2020 with your head clear, feet on the ground and eyes wide open can leave you prepared for the opportunities and challenges ahead.

To a prosperous and Soaring Twenties.


Nomi Prins is a former Managing Director at Goldman Sachs, independent journalist, author of seven books and an engaging, captivating and extremely knowledgeable keynote speaker. She is widely sought-after for her unique perspective that crosses the divide between politics, finance and the economy. Her most recent book, Collusion: How Central Bankers Rigged the World, was selected as Amazon’s Best Business and Leadership Book of 2018. +Learn More