Watch These Five Risks for Stocks in 2020, Barings’ Smart Says
Watch These Five Risks for Stocks in 2020, Barings’ Smart Says
(Bloomberg) -- U.S. equities may be at a record high, but a number of issues are looming in the distance that could pose a risk to them in 2020, according to Barings LLC.
Question marks over growth, profitability and debt point to potential speed bumps ahead for the equity rally, even though U.S. consumption remains strong and central banks are easing, wrote chief global strategist Christopher Smart in a report. Here are five risks he sees:
| Risk | Baring’s View |
|---|---|
| Growth drivers | Better demand from Latin America and the Middle East may not prop up a global expansion to that extent, while questions hang over whether Europe will bounce back enough. |
| Profit expansion | This late in the U.S. cycle, revenues and margins are bound to come under pressure even if borrowing rates remain in check. |
| Debt worries | Corporate debt has been edging higher in the U.S. and Europe and remains elevated in China |
| Fiscal policy | Amid budget deficits projected above 5% of GDP in the U.S., new federal spending that boosts growth remains hard to imagine |
| Business investment | Amid political and economic uncertainty business investment is unlikely to ramp up in the next year or two, even with a “phase one” trade deal |
“Markets still have room, but the clouds are gathering,” Smart wrote. “Just because we avoided them last year doesn’t mean we will always be so lucky.”
To contact the reporter on this story: Sybilla Gross in Sydney at sgross61@bloomberg.net
To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Andreea Papuc, Cormac Mullen
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