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2020 Outlook: Global Politics & Policy

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By Eric Stein, CFACo-Director of Global Income, Eaton Vance Management

Boston - I think we'll see an economic rebound in 2020 versus 2019, which was a year of a strong consumer, but slowdowns in manufacturing, global trade, the electronics cycle and the auto cycle. So I expect that activity to rebound this year — obviously pending what happens with the trade war.

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Changing of Lagarde

We'll be watching what happens at the European Central Bank, with Christine Lagarde taking over for Mario Draghi. I think she'll still keep with easy monetary policy, though I expect her to look at the efficacy of negative rates. Globally, central bankers are realizing the cost of negative yields. They're really a tax on the banking sector — particularly in bank-led economies such as Europe and Japan.

Where I expect her to be different from Mario Draghi is that she'll likely focus more on fiscal policy. Given her background as head of the International Monetary Fund (IMF), I expect her to push a lot behind the scenes to various governments — especially Germany — to get additional fiscal spending.

Inflation picking up

Central banks globally have tried to make it clear to market participants that they want higher inflation. So after many years of inflation falling, I expect 2020 could be that year when we finally see inflation picking up. Accordingly, we think some of the more attractive places to invest in developed market fixed income is in inflation-linked securities.

Political cycle

Certainly, I think all eyes are going to be on the U.S. presidential election in 2020 — both the Democratic primary process as well as the general election in November. Given how different the parties and likely candidates will be, we could see very different market outcomes.

Bottom line: In 2020, once again, I think politics and policy will play a major role in financial markets.

The views expressed in these posts are those of the authors and are current only through the date stated. These views are subject to change at any time based upon market or other conditions, and Eaton Vance disclaims any responsibility to update such views. These views may not be relied upon as investment advice and, because investment decisions for Eaton Vance are based on many factors, may not be relied upon as an indication of trading intent on behalf of any Eaton Vance strategy. The discussion herein is general in nature and is provided for informational purposes only. There is no guarantee as to its accuracy or completeness.