Don't discount a 2020 rebound



​The immediate global economic outlook remains weak but cycle analysis suggests that 2020 will be a recovery year.

Growth, indeed, could be strong in H2 2020. The stockbuilding and business investment cycles are expected to bottom by Q2 2020 at the latest, while the upswing in the longer-term housing cycle should regain momentum in response to current falls in mortgage rates and as the drag from the other cycles is lifted.

This optimistic scenario requires confirmation from a rise in global six-month real narrow money growth – currently still below 2% – to well above the 3% level judged here to be a necessary condition for an economic recovery. This could occur in late 2019 or early next year.

The suggestion that US housing will be a source of economic strength next year is supported by the latest Fed senior loan officer survey, showing the net percentage of respondents reporting stronger mortgage demand surging to a 16-year high – see chart*. The survey was conducted in July before the recent further fall in Treasury yields, which has yet to feed through to mortgage rates.


Economists were too optimistic about 2019 global economic prospects but many are now warning of a recession in 2020-21. Monetary and cycle analysis, by contrast, indicates that economic weakness will reach a maximum during H2 2019. Assuming that monetary trends continue to improve, investors could consider using “risk-off” market moves to reduce defensive positioning and increase exposure to 2020 recovery plays.​

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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