The bull market coming out of the global financial crisis looks set to extend its record-setting run in 2020 after clouds that had darkened the investment horizon in 2019 grew less threatening toward the end of the year.
With the recent upturn in global manufacturing data, a "phase-one" U.S.-China trade deal and now a strong U.K. parliamentary majority for Brexit, "there's definitely a sense that a lot of the uncertainties that have plagued markets throughout 2019 are greatly reduced," said Kerry Craig, Melbourne-based executive director and global market strategist with J.P. Morgan Asset Management.
For the most part, market veterans say that holds true, for now, even as concerns about the ongoing trade wars were superseded by fears of a real war, in the wake of the U.S. President Donald Trump, on Jan. 3, ordering the killing of a key Iranian leader, Maj. Gen. Qassem Soleimani.
Iran's government retaliated with a missile strike against U.S. military positions in Iraq that reportedly resulted in no casualties. That was followed by signs of both sides stepping back from actions that could expand the conflict.
Wouter Sturkenboom, chief investment strategist for Europe, the Middle East and Africa and Asia-Pacific regions with Northern Trust Asset Management, noted that while the move clearly adds to uncertainty, developments so far have been fairly muted.
"Escalation is not our base case ... and we currently do not see the need" to downgrade Northern Trust's forecasts for the coming year, he said.
The global economy faces considerable challenges but "recession risks have dialed down a notch or two" and the outlook is looking brighter — a supportive environment for risk assets, Mr. Craig said.
On Jan. 6, Keith Wade, London-based chief economist with Schroders PLC, lifted his 2020 market-weighted forecasts for global growth to 2.6% from 2.4% and U.S. growth to 1.8% from 1.3%, citing the U.S.-China trade truce and the boost likely over the coming year from the abrupt return to very loose monetary policy 12 months ago.
"The situation in Iran challenges our assumption that 2020 will be a year of reduced geopolitical risk (but) it looks like being relatively contained at this stage," Mr. Wade said. If escalation ensues, meanwhile, the U.S. has levers to pull to moderate the rise in oil prices and beyond that, the size of the region in economic terms is not so great so "I'm not expecting a material impact at this stage," he said.
On Jan. 9, meanwhile, Mr. Wade's team — in a study regarding what the flare-up of Middle East tensions could mean for markets — contended that investors would have enjoyed better long-term results if they had not taken risk off the table during previous periods of heightened geopolitical uncertainties such as during the Gulf War and Mr. Trump's period of nuclear brinkmanship with North Korean dictator Kim Jong Un.