Looking back, 2019 will be remembered as the year when major central banks staged a significant turnaround in monetary stance. The easing was precipitated by the US Federal Reserve’s (Fed) dovish pivot in January, and since then we have seen both the Fed and European Central Bank (ECB) loosening financial conditions. Indeed, 2019 has seen the largest amount of central bank easing since the 2008 financial crisis.

On the back of this, investors have begun to show signs of an acute case of FOMO (fear of missing out) and put cash to work in a way that has not been seen for many years. Some fund manager surveys show that cash levels are now at their lowest in six years.

While central banks’ accommodative monetary stances will keep animal spirits high in the short term, the implications for the medium and longer term are more sobering. Over the medium term, it will limit central banks’ ability to ‘fight’ any recessions further down the line. It will also keep fuelling wealth inequality and exacerbate the current wave of populism across the political arena.

Key Macro Risks

Here are the main risks we have identified, and our view on these:

  1. Central banks resume hiking interest rates if they believe the growth risks have passed and inflation pressures are building (high impact, low probability).
  2. A re-escalation in the trade war that delivers a massive blow to global business confidence, investment spending and global supply chains (high impact, medium probability).
  3. Victory of a progressive Democrat, such as Senator Warren or Bernie Sanders, in US presidential elections, triggering a negative policy shift for corporate profits (medium impact, low probability).
  4. Other geopolitical risks, such as an escalation of Hong Kong unrest – which would trigger an aggressive China response and subsequent global sanctions on China – or actions by Iran that threaten global oil supply (medium impact, medium probability).

Read the full Q1 2020 Macro Here




Disclaimer: The value of investments and any income from them can go down as well as up and investors may not receive back their original investment amount. This communication is for information purposes only. It is not intended as a personal recommendation of particular financial instruments or strategies and it does not provide individually tailored investment advice. This document provides the views of the London & Capital Investment Team examining the fundamental background, economic outlook and possible effect on asset markets. This document is not an invitation to subscribe and is by way of information only. Nothing contained herein constitutes investment, legal, tax or other advice nor is it to be solely relied on in making an investment or other decision. If you are considering investing, you should consult your London & Capital adviser. The views expressed herein are those at the time of publication and are subject to change. Correct at time of going to press.
London and Capital Asset Management Limited is authorised and regulated by the financial conduct authority, 12 Endeavour square, London, E20 1JN. Firm reference number 143286. Registered in England and wales, company number 02112588. © London and Capital Asset Management Limited. All rights reserved. London and Capital Wealth Advisers Limited is authorised and regulated by the UK Financial Conduct Authority (firm reference number 120776) and by the U.S. Securities and Exchange Commission of 100 F street, NE Washington, DC 20549, with sec firm reference number 801-63787. Registered in England and Wales, company number 02080604. © London and Capital Wealth Advisers Limited. All rights reserved.