The year that just went by (2019) was a real rollercoaster ride, from the US-China trade wars to the Hong Kong protests and their effect on the world stock markets and the economy. Here are some of the predictions regarding financial trends for 2020.
The usual forecasters like that of the International Monetary Fund and the World Bank say that the growth will be done by 3.4 per cent and 2.7 per cent respectively. The main reason for the optimism is because of the monetary policies of various Central Banks around the world. To boost the credit crunch and increase the flow of funds in the economy the banks have increased the money supply which helped in recovering from the bad effects of the trade wars.
There are many risks and surprises like a continuing trade war, imploding markets, debt time bombs which are all wild cards of 2020, only point to the downwards direction.
It may seem to many because of recent events and economic downturn that the world will see a recession in 2020 but it is not going to happen so. A slowdown has been seen in the manufacturing and industrial production due to the tariffs on imports by the US. A resolution between China and the US will help improve U.S. corporate confidence. The consumer spending will remain high in countries like the US since unemployment is at an all-time low. But other countries where supply has been reduced due to the trade wars, companies are seeing lower growth and so the consumption will remain low.
Germany, on the other hand, is on the edge of recession and it is a major economic influencer in the Eurozone. It could bring down the rest of the European Union along with itself because of this reason.
The only industry which might see some growth in the job market would be the healthcare and services sector. The healthcare industry would remain to be a growing industry and thus the increase in opportunities for individuals looking for a job in this industry. Even though the services sector is the biggest contributor to the economy, it also has the shortest business cycle. So it would be the first jobs market to be affected by a recession.
In countries like the US if the unemployment remains low along with lower interest rates, then there would be an increase in the amount of debt that people would take. This means an increase in the amount of money each individual would have. This could increase inflation and be an indicator for the federal reserve to increase or hike interest rates to keep inflation in check.
Since the consumer is strong and lending is on a rise due to low mortgage interest rates, the housing market would remain strong. But again there are factors like less and less of the young people buying houses in today’s time. This could be a risk factor for the housing market. The housing market could also be affected by a possible hike in interest rates.
Consumer spending will remain high for countries where the interest rates are low and the unemployment rate is also low. But if any of those factors slip then it can reduce the consumer spending.
The Bottom Line
The European markets and also the Asian markets are at a better position than the US to perform after a long period of a continuous down market. A resolution of the Brexit, US-China Trade deals and also easing monetary policy could all help in benefitting global growth.
But nothing is a certain and sudden turn of events could very well change the predictions in a moment. It is very important for one to remain alert and in the lookout for indicators in order to make investment decisions and also decide when to pull out your money from the markets.