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FY 2020 Outlook & Comment

China could tip the scales

After the depressing results of the previous year, no investor would have expected that 2019 would bring a diametrically opposed development, which would even lead to one of the strongest years worldwide in the equity markets in historical comparison. This change is all the more astonishing when you consider that the global macroeconomic outlook has not experienced a comparable turnaround but, on the contrary, has weakened further.

To the Editorial

Editorial

After the depressing results of the previous year, no investor would have expected that 2019 would bring a diametrically opposed development, which would even lead to one of the strongest years worldwide in the equity markets in historical comparison. This change is all the more astonishing when you consider that the global macroeconomic outlook has not experienced a comparable turnaround but, on the contrary, has weakened further.

The solution to the puzzle of this divergence lies in the renewed surge in liquidity provided by central banks. However, there is a great danger that the effect will be limited to a temporary stimulation of the financial markets. Especially as China's stimulus efforts are lagging behind the rest of the world, unlike in earlier phases of the global economic slowdown in 2015, 2011 and 2008. If this reflects the reaching of structural limits, China could turn out to be the proverbial tipping point for the outlook of the global economy in the coming year.

Against this backdrop, we remain cautious and defensive in our assessment of the outlook for the coming year, despite and precisely because of the euphoria currently being observed on the markets. This time there are no signs of a substantial recovery in growth expected from many quarters, similar to the 2016 rebound. The current high in equity markets is accompanied by a continued erosion of fundamentals, while central banks have already shot their powder before even being confronted with a recessionary economic environment.

Dr. David-Michael Lincke



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FY 2020

Outlook & Comment

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Dr. David-Michael Lincke

Head of Portfolio Management

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