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{"source_url": "https://web.archive.org", "url": "https://web.archive.org/web/20220108145306id_/https://www.theguardian.com/business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020", "title": "US election, Brexit and China to sway the markets in 2020", "top_image": "https://i.guim.co.uk/img/media/96a8f7d4badb0f8151875f589443c4227ef475b5/256_0_3473_2084/master/3473.jpg?width=1200&height=630&quality=85&auto=format&fit=crop&overlay-align=bottom%2Cleft&overlay-width=100p&overlay-base64=L2ltZy9zdGF0aWMvb3ZlcmxheXMvdGctYWdlLTIwMjAucG5n&enable=upscale&s=bd44db41b2a036fb394d46987f4217b7", "meta_img": "https://i.guim.co.uk/img/media/96a8f7d4badb0f8151875f589443c4227ef475b5/256_0_3473_2084/master/3473.jpg?width=1200&height=630&quality=85&auto=format&fit=crop&overlay-align=bottom%2Cleft&overlay-width=100p&overlay-base64=L2ltZy9zdGF0aWMvb3ZlcmxheXMvdGctYWdlLTIwMjAucG5n&enable=upscale&s=bd44db41b2a036fb394d46987f4217b7", "images": ["https://i.guim.co.uk/img/uploads/2017/10/06/Graeme-Wearden,-L.png?width=300&quality=85&auto=format&fit=max&s=e7c6ad839ffcd2d7612b7976017923ac", "https://i.guim.co.uk/img/media/96a8f7d4badb0f8151875f589443c4227ef475b5/256_0_3473_2084/master/3473.jpg?width=465&quality=45&auto=format&fit=max&dpr=2&s=58abbc8909744b6aa8fbf844ee603330", "https://i.guim.co.uk/img/media/96a8f7d4badb0f8151875f589443c4227ef475b5/256_0_3473_2084/master/3473.jpg?width=1200&height=630&quality=85&auto=format&fit=crop&overlay-align=bottom%2Cleft&overlay-width=100p&overlay-base64=L2ltZy9zdGF0aWMvb3ZlcmxheXMvdGctYWdlLTIwMjAucG5n&enable=upscale&s=bd44db41b2a036fb394d46987f4217b7", "https://i.guim.co.uk/img/media/220c17fdb48749bcc31bc4d8d9d53f1518ef29ee/0_284_4256_2554/master/4256.jpg?width=445&quality=45&auto=format&fit=max&dpr=2&s=64a4488e8b6e432d799a822c96626e59", "https://sb.scorecardresearch.com/p?c1=2&c2=6035250&cv=2.0&cj=1&cs_ucfr=0&comscorekw=Economic+growth+(GDP)%2CInternational+trade%2CEconomics%2CTrade+policy%2CGlobal+economy%2CMergers+and+acquisitions%2CBusiness%2CBrexit%2CUS+foreign+policy%2CUK+news%2CUS+news%2CEuropean+Union%2CUS+markets%2CStock+markets%2CBitcoin%2CEuropean+Central+Bank%2CFederal+Reserve", "https://i.guim.co.uk/img/media/83385b62f48ff34eddb6094f1b1383749b0733a8/361_0_3806_2283/master/3806.jpg?width=445&quality=45&auto=format&fit=max&dpr=2&s=85496594aa07f43e0fc08b19420403f1"], "movies": [], "text": "After profiting from strong markets in 2019, investors are expecting 2020 to bring further rising asset prices and lively merger activity. But Brexit, the US presidential election and the US trade war with China could all spring nasty surprises over the next 12 months and give the long-running bull market a jolt.\n\nThe UK and Brexit\n\nRelief that Brexit is resolved will be replaced by anxiety over the future relationship between Britain and the EU, with the transition period due to end in December 2020.\n\nDean Turner, a UK economist at UBS Global Wealth Management, predicts UK GDP will only rise by 0.9% in 2020, even weaker than the 1.2% in 2019.\n\n\u201cIt\u2019s possible that there will be some bounce in activity given the clarity on Brexit, but any improvement in sentiment is likely to fade as the next Brexit deadline draws closer,\u201d Turner says.\n\nRuth Lea, an economic adviser to the Arbuthnot Banking Group, believes the UK will get a \u201cfiscal boost\u201d from the forthcoming budget, due in February. This could include an increase in the threshold for paying national insurance \u2013 in effect a tax cut.\n\n\u201cThe economy has been facing the twin headwinds of Brexit uncertainty, which has almost certainly depressed business investment and could also have undermined the consumer, and the weaker global economy, especially in the eurozone. Having said that, there still seems to be growth,\u201d Lea says.\n\nBoris Johnson faces further tough talks with Brussels that could hit sterling. Photograph: Pier Marco Tacca/Getty Images\n\nThe London stock market shrugged off Brexit anxiety during 2019 to post its best year since 2016. Several analysts predict it will rally in 2020 as relatively unloved UK shares are embraced by investors again.\n\nJeremy Podger, who manages Fidelity\u2019s \u00a32.7bn global special situations fund, says the City should benefit from the increased certainty created by the Conservative win in last month\u2019s election.\n\n\u201cIt appears to be the case that, in general, investors have been taking money out of the UK stock market since the referendum and that it is generally underrepresented in many international portfolios. This result could be a trigger for these investors to \u2018neutralise\u2019 their exposure while existing investors are unlikely to sell for now,\u201d Podger explains.\n\nBut the prospect of fresh tough negotiations between London and Brussels over their future relationship will probably weigh heavily on sterling in 2020.\n\nThe UK could crash on to World Trade Organization trade rules in a year\u2019s time if it cannot reach an agreement and refuses to extend the transition period. This would be \u201ca significant step down from the current arrangement and an arrangement that investors fear will negatively impact the UK economy,\u201d says Fiona Cincotta of City Index.\n\nTakeovers in the UK\n\nThis year there could also be a rise in takeover activity. Jonathan Boyers, the head of mergers and acquisitions at KPMG, predicts a flurry of deals in the next six months now the UK has a stable government.\n\n\u201cMany of those who have been mulling over an exit have done their early prep work and are set to launch processes in the new year. Meanwhile, I expect there will be a significant amount of demand, keeping prices high, as the market makes up for some of the lost volume,\u201d Boyers says.\n\nBen Higson, the head of the London corporate practice at law firm Hogan Lovells, also expects a \u201cdynamic\u201d mergers and acquisitions market in 2020.\n\n\u201cThe removal of political uncertainty in the UK has resulted in early signs of confidence returning to deal-making activity, keeping boardrooms and other decision-makers busy in the final weeks of the year and, we expect, early in the new year,\u201d says Higson.\n\nTrump and US markets\n\nDonald Trump\u2019s attempt to win a second term is likely to dominate the headlines for much of the next 12 months.\n\nMarkets often do well in an election year \u2013 partly because the White House incumbent has every incentive to make people feel richer. Trump is rumoured to be considering a fiscal boost known as \u201ctax cuts 2.0\u201d which could lift his popularity, and stocks, before the November election.\n\nMany investors have \u201cpriced in\u201d a Trump re-election, says Edward Moya of the foreign exchange firm OANDA. A Republican win has been Wall Street\u2019s \u201cbase case for a while\u201d, so a Democratic win could startle the markets.\n\n\u201cDespite the strong economy, key battleground states such as Wisconsin, Ohio, Michigan and Pennsylvania all have Biden leading Trump in recent polls. A Biden presidency would still be positive for US stocks but perhaps a few percentage points lower than a Trump victory,\u201d Moya points out.\n\nBut if Elizabeth Warren or Bernie Sanders were to beat Trump, tech stocks, banks and pharmaceuticals firms could all face tougher regulation, triggering a sell-off.\n\nJohn Moore, a senior investment manager at Brewin Dolphin, says political concerns are already being priced into some stocks.\n\n\u201cElizabeth Warren, for example, has made no secret of her feelings about Facebook and a desire to break up some of the other tech giants. Other candidates have targeted healthcare,\u201d he points out.\n\nOn average, Wall Street strategists predict the S&P 500 will gain 5% in 2020, compared with a 28% rally in 2019.\n\nTrade disputes\n\nTrade tensions could escalate in 2020, particularly if the US intensifies pressure on Europe. Last month the US trade representative, Robert Lighthizer, criticised the \u201cvery unbalanced relationship\u201d in trade across the Atlantic, signalling it was a White House priority for 2020.\n\nDonald Trump with Xi Jinping. The US and China are due to sign a trade deal but the dispute could flare up again, leading to the reimposition of tariffs. Photograph: Nicolas Asfouri/AFP via Getty Images\n\nLighthizer\u2019s comment \u201cimparts a high risk of an escalation of tensions\u201d, says Marc Ostwald of ADM Investor Services. He fears that a US-EU trade war would \u201cinevitably\u201d tip the German economy into recession.\n\nThe US economy is enjoying its longest expansion ever, having been growing for more than 10 years. Fears of a recession in 2019 proved unfounded, but the trade tensions stirred up by Trump are bad for growth.\n\n\u201cTrade tensions will continue to foster unpredictability in economic policymaking and cause a drag on demand and capital investment,\u201d predicts Los Angeles-based Hercules Investments.\n\nChina and the US are due to sign their phase one trade deal this month. But there is a risk of this dispute flaring up again, leading to tariffs being reimposed on imports. That would have a chilling impact on the global economy.\n\nChina\u2019s economy is also likely to keep cooling in 2020, having slowed to its slowest annual growth rate in three decades in 2019, at 6%. Beijing will keep trying to jumpstart growth in 2020, but Nariman Behravesh, the chief economist of IHS Markit, says China is fighting structural factors including an ageing population and weaker productivity growth.\n\n\u201cWe predict China\u2019s growth rate will slide even further, to 5.7% in 2020 and 5.6% in 2021, unless the government puts in place a more aggressive stimulus programme,\u201d Behravesh says.\n\nMarkit also predicts that the US economy will grow by about 2.1% during 2020 \u2013 below the 3% targeted by Trump. Its manufacturing sector has slowed in recent months, but December\u2019s jobs report did beat forecasts \u2013 an encouraging sign for Trump.\n\nCentral banks\n\nCentral banks will, once again, have a major impact on the financial markets \u2013 beyond their traditional remit of price stability. The US Federal Reserve is expected to leave interest rates on hold but could cut borrowing costs if economic data turns sour.\n\nIn Europe, Christine Lagarde is overseeing a review of the European Central Bank\u2019s operations, with a new focus on the climate emergency. But she\u2019s not expected to change the ECB\u2019s dovish approach, so interest rates could remain at record lows for some time.\n\nIn the UK, interest rates could be cut if the UK economy fares badly once Brexit takes place on 31 January.\n\nBitcoin\n\nIn the cryptocurrency world, the major event will probably be a technical change that halves the reward for digitally mining bitcoins. This halving, likely to take place in May, should reduce the supply of new bitcoins.\n\nThe two previous times when the block reward was halved, bitcoin rallied strongly afterwards.\n\n\u201cBitcoin halvings are important events for traders because they reduce the number of new bitcoins being generated by the network. This limits the supply of new coins, so prices could rise if demand remains strong,\u201d IG told clients.", "keywords": [], "meta_keywords": [""], "tags": [], "authors": ["Graeme Wearden"], "publish_date": "Wed Jan 1 00:00:00 2020", "summary": "", "article_html": "", "meta_description": "Investors expect a strong year but the presidential race and trade wars could spring nasty surprises<br>", "meta_lang": "en", "meta_favicon": "https://static.guim.co.uk/images/favicon-32x32.ico", "meta_data": {"description": "Investors expect a strong year but the presidential race and trade wars could spring nasty surprises<br>", "viewport": "width=device-width,minimum-scale=1,initial-scale=1", "theme-color": "#052962", "og": {"url": "http://www.theguardian.com/business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020", "image": "https://i.guim.co.uk/img/media/96a8f7d4badb0f8151875f589443c4227ef475b5/256_0_3473_2084/master/3473.jpg?width=1200&height=630&quality=85&auto=format&fit=crop&overlay-align=bottom%2Cleft&overlay-width=100p&overlay-base64=L2ltZy9zdGF0aWMvb3ZlcmxheXMvdGctYWdlLTIwMjAucG5n&enable=upscale&s=bd44db41b2a036fb394d46987f4217b7", "description": "Investors expect a strong year but the presidential race and trade wars could spring nasty surprises", "type": "article", "title": "US election, Brexit and China to sway the markets in 2020", "site_name": "the Guardian"}, "article": {"author": "https://www.theguardian.com/profile/graemewearden", "publisher": "https://www.facebook.com/theguardian", "section": "Business", "published_time": "2020-01-01T12:16:49.000Z", "tag": "Economic growth (GDP),International trade,Economics,Trade policy,Global economy,Mergers and acquisitions,Business,Brexit,US foreign policy,UK news,US news,European Union,US markets,Stock markets,Bitcoin,European Central Bank,Federal Reserve", "modified_time": "2020-02-03T11:44:10.000Z"}, "al": {"ios": {"url": "gnmguardian://business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020?contenttype=Article&source=applinks", "app_store_id": 409128287, "app_name": "The Guardian"}}, "fb": {"app_id": 180444840287}, "twitter": {"dnt": "on", "app": {"id": {"iphone": 409128287, "ipad": 409128287, "googleplay": "com.guardian"}, "name": {"googleplay": "The Guardian", "ipad": "The Guardian", "iphone": "The Guardian"}, "url": {"ipad": "gnmguardian://business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020?contenttype=Article&source=twitter", "googleplay": "guardian://www.theguardian.com/business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020", "iphone": "gnmguardian://business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020?contenttype=Article&source=twitter"}}, "image": "https://i.guim.co.uk/img/media/96a8f7d4badb0f8151875f589443c4227ef475b5/256_0_3473_2084/master/3473.jpg?width=1200&height=630&quality=85&auto=format&fit=crop&overlay-align=bottom%2Cleft&overlay-width=100p&overlay-base64=L2ltZy9zdGF0aWMvb3ZlcmxheXMvdGctYWdlLTIwMjAucG5n&s=30ef36c9ca3e748db3e83f00e45aef39", "site": "@guardian", "card": "summary_large_image"}, "robots": "max-image-preview:large"}, "canonical_link": "http://www.theguardian.com/business/2020/jan/01/us-election-brexit-and-china-to-sway-the-markets-in-2020"} |
