Market perspectives - February 2020

04 February 2020 | Markets and economy


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In this latest Market Perspectives issue, we highlight the Vanguard house view on a number of current macroeconomic and market topics including monetary policy, economic growth, currencies, trade, asset returns and more.

Key highlights for this month*:

  • Growth: Anticipate global growth to soften and some economic spillover from the coronavirus outbreak in China.
  • The Fed: Expect rate cuts totaling 25 to 50 basis points before the end of 2020.
  • Trade tensions: Anticipate some easing but not a significant bounce-back.
  • Global inflation: Look for continued muting, with U.S. inflation remaining below the Fed’s 2% target.
  • Election developments in the U.S.: Expect little effect on asset returns, research shows.

Slowdown in global growth ahead

  • Vanguard expects global growth to continue to soften over the next 12 months owing to trade tensions, policy uncertainty, and fading U.S. fiscal stimulus.
  • We are more bearish than the consensus on our growth outlooks for the United States, the United Kingdom, and China.
  • We see GDP growth in the United States falling below trend in 2020, to around 1%. Business sentiment continues to weaken amid persistent uncertainty, but the housing sector appears to have turned around.
  • The main effect on China's economic growth from the coronavirus outbreak will likely be one of sentiment, with the government's response determining the degree to which people are fearful or confident. The good news is that the Chinese government has taken serious actions quickly. Vanguard therefore has maintained its outlook for China’s 2020 GDP growth at 5.8%, though the risk is clearly tilting toward the downside. Click here to learn more about the coronavirus implications.
  • Our expectation for growth in the euro area in 2020 is that growth will be below trend at 1.0% amid weakness in manufacturing, particularly in Germany, on global trade tensions including Brexit uncertainty and sagging demand for automobiles.
  • We maintain our expectation for growth in emerging markets of around 4.6% in 2020. We expect emerging markets in Asia, not including China, to continue to be the fastest-growing regions worldwide.

Expected growth in 2020

U.S., euro area, and China 2020 growth estimates

Asset class return outlooks

The 10-year annualized nominal return projections, based on market conditions as of 30 September 2019, are as follows:

Asset class return outlooks

These probabilistic return assumptions depend on current market conditions and, as such, may change over time. The projections and other information generated by the Vanguard Capital Markets Model® regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Distribution of return outcomes from the VCMM are derived from 10,000 simulations for each modeled asset class. Simulations are as of 30 September 2019. Results from the model may vary with each use and over time. Source: Vanguard Investment Strategy Group.

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*This monthly report represents the Vanguard house view as of 22 February 2020.



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