Uncertainty surrounding the US-China trade war remains the biggest challenge facing the global economy in 2020, according to investment chiefs at 10 of the world’s largest fund managers overseeing $19 trillion of assets, reported the Financial Times.
The S&P 500, the main US equity benchmark, returned 31.5% including dividends last year in its second best annual performance this century, extending a record-breaking bull run that stretches back to March 2009. But further gains for US stocks in 2020 are expected to be much more modest, with asset management CIOs increasingly concerned about the possibility of a correction after Wall Street’s most sustained expansion.
“The likelihood of a large drawdown for equities and other risky assets remains high,” cautioned Greg Davis, CIO at Vanguard, the world’s second largest asset manager. He added that investors should be prepared for the “geopolitical uncertainty and unpredictable policymaking” of the past few years to persist in 2020.
The US-China trade war, which has dragged on since June 2018, is the single biggest threat to the stability of financial markets, according to the CIOs polled by FTfm. “The crucial issue to monitor [in 2020] will be developments on the trade front,” said Joanna Munro, HSBC’s asset management CIO. Other fund companies that singled out US-China trade tensions as a concern included BlackRock, LGIM, UBS and Vanguard.