A ‘year of decisions’ will decide the health of the global economy in 2020 and beyond, an audience at Julius Baer’s biannual market outlook event in Guernsey has heard.
Janwillem Acket, Chief Economist for the Swiss Wealth Management Group, was visiting the island to address an invited audience and outlined the key events that are going to impact the global financial markets.
The ongoing trade war between the US and China, the upcoming US election and Brexit are all issues that could be finalised this year but the complexity involved means that uncertainty prevails in the short term.
Discussing Brexit, Mr Acket acknowledged that the result of the UK election in December had had a positive impact on financial markets but that negotiations were only just beginning to secure the UK’s exit from the EU.
“Having begun the transition period last week the UK is at the end of the beginning, rather than the beginning of the end,” Mr Acket warned. “The negotiations are going to be incredibly complex and there are so many details to finalise that the transition period simply won’t be enough time. Don’t forget that the transition timeframe was agreed when then UK’s departure date was March 2019, not January 2020.”
It’s not just in the UK that uncertainty is impacting markets however, as Mr Acket highlighted.
“In the US, it still isn’t clear who the Democratic candidate for the November election will be. We probably won’t know that until after ‘Super Tuesday’ on 3 March and even then there’s a long campaign ahead.
“Interestingly, whoever the candidate is will likely follow a similar path to the current Trump Administration regarding China, as there is a consensus in the US that China poses the greatest threat to their economic dominance.
“China remains a global superpower but the effect of the Coronavirus, which will surely impact domestic production in the first quarter of this year, probably won’t be realised until the third quarter of 2020 when the effect of the disruption to Chinese production will be felt on global supply chains.”
Portfolios still performing well
Despite continued uncertainty, Mr Acket was not predicting a global recession and advised that investors can still expect good returns if invested in the right areas.
This was echoed by Julius Baer’s Head of Investment Management in Guernsey, Craig Allen, who also addressed the audience.
“The key to successful investing in these interesting times is in not following the crowd and staying active in managing investments,” Mr Allen said.
“At Julius Baer we think outside the box and don’t invest in the same stocks as everyone else, this enables us to find better returns for our clients. For example, there is little crossover between Julius Baer’s holdings and the top holdings with the FTSE 100.
“By actively managing our clients’ portfolios we stay on top of the markets and take advantage of our global research capacity to invest where others don’t.”
The green agenda
Mr Allen also told the audience about the increased popularity of Environment, Social and Governance (ESG) investing, which Guernsey is backing with its Guernsey Green Finance initiative.
“It’s remarkable to see the way the whole of our industry has moved towards addressing ESG concerns in the last 12 months alone,” said Mr Allen. “At Julius Baer we’ve been advocates of responsible investing for a long time – we bought our first ESG fund in 2011- and we’re signed up to the UN Principles for Responsible Investment.
“In the last year ESG funds have gone from a niche concern to one of the main requests from our clients and one of the biggest single growth areas in our industry. That’s great news for Guernsey, which has positioned itself strongly in this area, but also for society more broadly, which will benefit from greater levels of responsible investing.”
Mr Acket and Mr Allen were addressing an audience at the Old Government House Hotel on Tuesday 4 February at Julius Baer in Guernsey’s market outlook event. Julius Baer has had a presence in Guernsey for more than 30 years and employs more than 100 people in the island.