SNAPSHOT2 min read

Market update – January 2020

A summary of our current economic and market views.



Charities Team

Global markets react to Middle Eastern tensions

Global equities ended 2019 at all-time highs. But events of 3 January in the Middle East, where Iranian General Soleimani was killed by a US drone strike, caused a spike in the oil price and rattled equity markets. Defensive assets such as government bonds and gold rallied.

The Iranians have threatened retaliation and markets remain concerned. We are watching closely to see if this is a passing squall – similar to last year's missile strike on the Saudi oil facilities – or something more serious.

In the wider picture, investors have been encouraged by the prospect of a trade deal between the US and China, with a “phase one” deal now agreed. This is good news for global economic activity and we recently upgraded our growth forecast for 2020 to 2.6%. Despite the more optimistic economic backdrop, global government bonds have also remained in demand, with yields still at very low levels.

Central banks remain supportive

Stock and bond markets continue to benefit from accommodative monetary policy. In the US, the Fed has indicated that it expects to leave interest rates unchanged in 2020, following three rate cuts in 2019. We expect to see the benefit of last year’s monetary policy easing have more visible impact on US growth in 2020.

In Europe, the new president of the ECB, Christine Lagarde, used her first press conference to reaffirm the bank’s commitment to keep interest rates at very low levels and maintain the pace of quantitative easing until inflation rises.

Brexit still a source of uncertainty in UK

The UK election last month resulted in a clear victory for the Conservative party. This provides markets with clarity about the near-term path of Brexit: the UK will be leaving the EU at the end of January.

UK equities, particularly those with domestic exposure, have rallied in anticipation of improved UK activity. However, there remains significant uncertainty about the UK’s future trading relationship with the EU and the rest of the world. The government has said it plans to legally prevent the extension of a trade transition period beyond 2020, raising the risk of disruption later in the year. In response, the pound quickly surrendered its post-election gains.

Remaining invested but with caution

We enter the new year with a neutral allocation to equities. Easing global trade tensions provide a tailwind for global growth in 2020. However, stock markets may already be “pricing in” the improved outlook. Over the course of 2019, share prices rose sharply but earnings expectations drifted lower. As a result, shares have become more expensive, leading us to become more cautious.

We remain underweight bonds, though some areas of the market – such as emerging markets – look more appealing. We continue to favour alternatives assets, including gold, which offer attractive diversification benefits.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Charities Team


Market views

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