Market Compass
January 2020

Edited by the Macro & Market Research Team.
A team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.

The team translates macro and quant views into investment ideas that feed into the investment process.

  • Easing global policy concerns (Brexit, US-China tensions) coincide with bottoming trade and manufacturing data, but new tension in the Middle East are likely to dampen the sentiment.

  • Some good news are already discounted by financial markets, but the positive risk/moderate inflation environment will favor risk sentiment in 2020, barring an escalation in political tensions.

  • We still expect the Federal Reserve (Fed) to cut rates in H1. The European Central Bank (ECB) will keep its accomodative stance.

  • Improved macro fundamentals justify an increase in the overweight in Credit and Equities, financed by an higher underweight in Sovereign bonds and Cash.

MARKET COMPASS
JANUARY 2020

RELATED INSIGHTS

COVID-19 FACTS & FIGURES
US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
EQUITIES: STAY POSITIVE WITH A VALUE-CYCLICAL TILT
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.
Video Outlook 2021: Repair and Despair
Watch the Outlook video with Vincent Chaigneau, Head of Research at Generali Investments