Monthly ETF Allocation Ideas - Special Edition Outlook 2020

Thursday 19 December 2019

Cross Asset Investment Strategy, Video

The December Special issue of Amundi Investment Insights is dedicated to 2020 Investment Outlook.

“With central banks still in the driving seat, bonds are likely to be supported by additional monetary stimulus . The search for yield in developed markets, both through spread (mainly in Europe) and duration (more in the US) is likely to remain in 2020 and to offer some opportunities in the low yield for longer global environment.”
“For govies, we maintain a preference for US Treasuries vs. other developed markets, on better absolute and relative valuations and more leeway at the Fed’s disposal in terms of conventional tools.”
“In the Eurozone, our preference stays with periphery vs. core, with Italian bonds closer to other BBB-rated instruments in the short- to medium-term segments, but still offering some premium in the long-term segment of the curve.”
“[In credit markets] We are positive on Euro IG, particularly on BBB-rated debt and financials. Strong technicals are here to stay, like ECB new net purchases and higher CSPP1 reinvestments, which provide steady positive investment inflows into the asset class and intensify yield hunting. However, liquidity conditions in the secondary market remain a key area to monitor.”

“The current cyclical slowdown phase calls for a cautious attitude, but also prepare for a U-turn when earnings and economic growth will reaccelerate .”
“Better earnings, positive liquidity and low interest rates may support the equity markets, as far as the trade war does not intensify.”
“Europe has suffered during this cycle from underperforming profits, strong international exposure and political risks, however, these negative factors are fading as the probability of a Brexit deal increases. Should a bottoming out of global manufacturing materialise, Europe will benefit more than others.”
“Investors should assess a possible bottoming out in earnings growth and be prepared to raise exposure to the most contrarian markets and sectors (the European, Japanese or emerging markets and the auto sector, for example) in the coming months and/or to exploit opportunities from dislocations.”
“[In EM] We are constructive on China A-shares. […] which are more exposed to the domestic economy and policy interventions."

“Investors should consider entering 2020 with a balanced stance, playing the minimum volatility factor, quality and high dividends , and be prepared to increase high dividends, value and even small caps.”
“The minimum volatility factor best fits the current phase of the cycle. However, at the same time investors should be aware that the next stage of the cycle will require a U-turn in terms of positioning, should a bottoming out of manufacturing become concrete.”
“Once the cyclical slowdown is over, it will be time to switch to the opposite of what worked during the previous phase, meaning it will be time to be contrarian and invest in oversold or high-beta stocks.”
“Once the outlook stabilises, and yields bottom out (Purchasing Manager Indices rebound, some fiscal expansion), there could be some potential for a continuation of the bull trend, with opportunities for cyclical stocks (quality in Europe, value in US and small cap)."