2020 Sector Outlook: The Macroeconomic Backdrop

By Craig Burelle, Macro Strategies Research Analyst |  03 January 2020
Sector Outlook

Everyone has their methods for mining valuable insights from the vast amount of data and news available in this age of information. At Loomis Sayles, leveraging our sector teams is one way we do this. These teams, composed of traders, analysts, strategists, and portfolio managers, are immersed in their respective sectors every day, watching markets, discussing trends, and debating potential investment opportunities. These experts cut through the noise and provide valuable, actionable insights to our investment teams.

To kick off 2020, we are providing our readers with a glimpse into this process with a new series featuring brief outlooks from our sector teams. But first, I’ll set the stage with my outlook for the broad macroeconomic backdrop.

Sector Outlook

A steady Fed and lower uncertainty could support risk sentiment

I think the macroeconomic environment will remain fairly benign in 2020, with downside risks and recession fears diminished. Lower uncertainty surrounding two major areas of market focus in 2019—US-China trade and Brexit—helped bolster investor sentiment for 2020.

The late-cycle environment will likely persist, with few signs of ending soon. We will be keenly focused on profit strength, which we believe will be a key determinant of further cycle extension.

The Federal Reserve is unlikely to adjust rates in the next 12 months. Chairman Powell has signalled a rate cut is unlikely in the near term and the bar for a rate hike is very high (requiring unexpected inflation acceleration).

If corporate profits hold up and rates stay relatively low, 2020 could be another year of positive risk asset performance. Emerging market credit and US equities look set to lead returns.


The information in this article is provided for general information purposes only and does not take into account the investment objectives, financial situation or needs of any person. Investors Mutual Limited (AFSL 229988) is the issuer and responsible entity of the Loomis Sayles Global Equity Fund (‘Fund’). Loomis Sayles & Company, L.P. is the investment manager.

This information should not be relied upon in determining whether to invest in the Fund and is not a recommendation to buy, sell or hold any financial product, security or other instrument. In deciding whether to acquire or continue to hold an investment in the Fund, an investor should consider the Fund’s product disclosure statement, available on the website www.loomissayles.com.au or by contacting us on 1300 157 862. Past performance is not a reliable indicator of future performance.