By Barbara Kollmeyer, MarketWatch
Investors are basking in some relief after the Federal Reserve indicated interest rates probably won’t go up in 2020, at least for now. And it also looks like there may be positive news coming on trade talks.
A lingering risk for some—Brexit—may finally see movement as the U.K.’s General Election gets under way.
Onto a cheery call of the day —after all, it’s the holiday season.
“Hold the epitaphs—this aging [economic] cycle seems likely to last beyond 2020,” says asset manager Russell Investments in its 2020 global outlook.
To be sure, Wall Street is getting more comfortable with the idea that a U.S. and global recession could be averted next year, thanks to some better-than-expected data.
Andrew Pease, global head of investment strategy at Russell Investments, tells clients that central bank easing, a de-escalating trade war and potential green shoots for global manufacturing “suggest we might be on the cusp of another ‘mini-cycle’ recovery through the first half of 2020.”
Pease says that means equities should outperform bonds, but non-U.S. stocks will be a better bet than Wall Street equities because they are more cyclical in nature—that is, they are more sensitive to economic developments. And echoing sentiments elsewhere, Russell says valuations have climbed a lot for U.S. stocks, so it prefers less pricey emerging markets, for example.
Note, JPMorgan just released its big calls for 2020, telling clients to stay overweight on equities, but urging them to look outside the U.S.
“Emerging markets have lagged all major indexes this year and positioning doesn’t appear stretched anymore. We think this is a good entry point for the trade,” says Mislav Matejka, head of global and European equity strategy, in a note.
The rationale is improved China data, the potential for a trade truce supporting emerging market equities, the likelihood of a softer dollar and steadier global growth, says Matejka.
The dollar /zigman2/quotes/210598269/delayed DXY +0.20% is down, post Fed.
The Dow /zigman2/quotes/210598065/realtime DJIA -0.58% , S&P /zigman2/quotes/210599714/realtime SPX -0.90% and Nasdaq /zigman2/quotes/210598365/realtime COMP -0.93% are soaring after President Donald Trump tweeted that a China trade deal is close.
European stocks /zigman2/quotes/210599654/delayed XX:SXXP +0.86% are up. The European Central Bank left key policies changed and President Christine Lagarde said the economy there is facing fewer risks.