Ebbing trade tensions and the effects of central bank easing should begin to stimulate global economic conditions in 2020.
To read the full article from Mike Gibbs and Joey Madere, CFA, see the Investment Strategy Quarterly publication linked below.
In 2020, we expect the trade war to simmer, the slump in U.S. and global manufacturing to improve, the global macro to benefit from central bank policy actions over the past year or so, while corporate profits will re-accelerate to the upside. All of the above paint a positive picture for the U.S. and global equities.
Despite our positive bias, we warn the path to equity gains will not be without typical periods of volatility, with global manufacturing stabilizing (as opposed to recovering). Also, setbacks with trade remain a possibility with adherence to final terms of the phase one trade deal necessary. After the nearly 30% gain for U.S. stocks in 2019, valuation leaves little room for multiple expansion, with the price to earnings (P/E) multiple over 19x trailing 12-month earnings. For this reason, the resumption of earnings growth is paramount to our theme.
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