Nobody really knows what is going to happen tomorrow. That is why people probably say that “tomorrow is a mystery”. Despite that, when it comes to the world of investing, people are always advised to prepare for “tomorrow”. But, how do you do that when you do not know what the markets have in store for you? Simply by being aware of the economic and investment landscape and by understanding the impact of the same on your investment portfolio.
A few things that you need to watch out for in 2020.
The US – China Trade War
Relations between the two global giants are now seemingly on the mend with the “Phase I” of the trade deal between the United States and China. The two nations announced a "Phase One" deal in their nearly two-year trade confrontation, with Washington committing to cancelling and reducing some tariffs in exchange for Chinese pledges to increase purchases of US exports and adopt trade reforms. The formal agreement is slated to be signed later this month. However, do not be in a hurry to bring out the party caps yet. While the signing of this deal has definitely boosted global investor sentiment, it would be wise to adopt a bit of caution and closely track further developments.
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GDP Growth
The country’s GDP growth has been flailing, while inflation is increasing at a fast clip. India’s GDP growth rate for Q2FY20 slowed to 4.5%. This is the lowest since the government adopted a new base year for GDP data in 2012. Previously, growth figures for Q1FY20 had dipped to 5 per cent, to an over six-year low. Gross value added (GVA) growth declined to 4.3 per cent in Q2 as compared with 6.9 per cent in the same period last year. On the ground activity has witnessed a sharp slowdown and consumption is drying up despite lower interest rates. 2020 will be about watching whether growth in India slips into a prolonged slump or manufacturing and consumption activity picks up.
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Equity & Debt Markets
Investment managers will be looking out for sings of an earnings recovery. The mid-cap space has corrected significantly over the last one year and investors should look out for quality mid-cap companies that are available at compelling valuations. The last year has been fairly tumultuous for the debt markets with a host of defaults impacting the credit markets. Investors have now become cautious and with more regulations, the year bring more stability in the debt space.
These are just a few of the things that one must watch out for. As always, have your ear to the ground and adopt a balanced investment approach.
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