With news headlines continuing to stir up confusion and uncertainty, it’s a good time to step back and consider what’s really important. Andrew Milligan, Head of Global Strategy at Aberdeen Standard Investments, looks at the main issues we should pay attention to and the areas we may be able to learn from.
Investors need to take a pretty broad view of events at the moment. Certain countries, such as Germany, and certain sectors, such as manufacturing, are going into recession, with the slowdown in global trade having a major effect. On the other hand, other parts of the world economy are actually doing well - consumer spending is growing in most countries, with service sectors such as travel and leisure holding up. So, the first factor to consider is whether manufacturing will pull the rest of the economy down or whether it will eventually recover if the rest of the economy holds up.
Business and consumer confidence will be important here, so politics is the second issue investors should pay attention to. Will opinion polls and the threat of impeachment in the US encourage or discourage President Trump to be more conciliatory? Will Brexit tensions pick up or die down, and will they have as big an impact on Europe as on the UK? Will tensions in the Middle East die down? These are just some examples of the political issues that may have an impact on business and consumer confidence.
The third thing to look at is central bank decisions. We've had a series of interest rate cuts in the major economies in recent months. Do these simply help existing borrowers survive a difficult period, or do they actually encourage more borrowing, for example to buy cars and homes, or for business investment? A key question is: was central bank easing a case of too little too late, or enough to make sure that global growth is sufficiently robust going into 2020?
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Important information
The value of your clients' investments can go down as well as up and may be worth less than was paid in. Information is based on Aberdeen Standard Investments' understanding in October 2019.
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