2020 Economic and Investment Outlook

The Key Private Bank Investment Center Team, December 2019

<p>2020 Economic and Investment Outlook</p>

From widespread geopolitical tensions to thorny problems such as wealth and income inequality, the global economy today is grappling with a vast array of uncertainties. And that makes it increasingly difficult to have a clear vision of what the coming year has in store.

Our 2020 Economic and Investment Outlook is designed to help investors take a step back, focus on the fundamentals, and see things with greater clarity. Of course, no one can predict the future with any kind of absolute certainty — that’s why we avoid making any specific point projections. Instead, we identify possible scenarios and the probabilities and implications of each. By thoroughly examining the factors driving the economy and investing, we believe we help investors gain insights on the various possible outcomes.

In this Outlook, we:

  • Discuss our approach to addressing the uncertainties confronting the economy and investing.
  • Describe the role of monetary policy in the Global Financial Crisis and its aftermath.
  • Explain the rationale behind the Federal Reserve’s policy reversal on the direction on interest rate changes and its impact on the economy.
  • Provide our outlook for 2020 along with our longer-term perspective.


Key Takeaways

  • 2019 in Review: Fortunately, as a result of actions by the Fed, economic conditions did not materially deteriorate. Specifically, the Fed’s pivot to lower interest rates helped forestall a recession and prompted the return of investors’ optimism. While 2018 was a year in which nearly all asset classes produced negative returns, 2019 was the mirror image, as all asset classes generated healthy gains.
  • Looking Ahead to 2020: The Outlook describes three possible scenarios for the economy over the next year: muddle through, cyclical breakout and reflation recovery, and cyclical downturn and deflationary scare. Our view is that the longest domestic economic expansion will continue in what will most likely be a “Muddle Through” environment — not overly optimistic, but not recessionary either.
  • Long-Term Perspective: We conclude with a discussion of two other scenarios — a new productivity paradigm and a fresh economic policy model — and how each of these may impact longer-term economic trends. Because developments in these areas could have significant implications for the economic and investment environment, we believe they are well worth investors’ attention as we go forward.