2020 Themes

Good Morning,

It seems that the markets have shrugged off some immediate risk as stocks have done well so far this quarter. But, according to a recent publication by the Chief Economist of Deutsche Bank 2020 will see some longer-term concerns still linger. Yesterday CNBC published an article highlighting 20 risks and I'll highlight a couple of risks worth paying attention to:

  1. The continuing growth of inequality
  2. Slow growth across seas
  3. Negative yielding debt

While I only highlighted three, I would push you to read the article as more risks are intertwined that I did not mention here. From my view, the writer is more concerned about slowdowns impacting corporate profits and balance sheets which would force them to be more conservative with their decisions. I chose to focus on the three above because these themes are the most interesting as their impacts will weigh on societies and decisions for years.

The continuing growth of inequality stems from individuals having a majority of their net wealth tied up in their house and not in their retirement/savings accounts. This won't be solved immediately but as older generations start to retire without proper savings, it will impact spending and their needs forcing changes in how families operate. Slow growth across the world, means lower returns and is intertwined with negative-yielding debt. These two phenomenons force investors to cluster in areas that provide the best growth or yield, which creates asset bubbles that at some point in time will pop. I state all of this because even though the market is doing well doesn't mean that there are no risks beneath the surface. Understanding the environment is the key to making better decisions.


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