We believe that 2020 will follow the pattern described in our Equity Outlook section and resemble the equity trade of 2016 or 2018. There will be plenty of political risk as the U.S. Presidential election unfolds. Markets will have to deal with two candidates, Donald Trump and the Democrat primary winner, who will bring almost polar opposite programs, from how to deal with China trade to corporate regulation to taxing the wealthy. The uncertainty and severity of the two presidential outcomes will necessarily bring volatility to the markets, especially if polling shows a tight race

The new year may also be challenging (or rather frustrating) for those who have gotten too comfortable sitting in passive index fund products. A focus on downside protection will be required, including relying on a manager selecting the best companies, and not blindly following capitalization-weighted equity indexes lower. Our focus in 2020 will be on high-quality earnings (while not over-paying for that quality), solid balance sheets, while avoiding firms whose current valuations have gotten too far above the company’s historic norms.

Ryze Investments Limited
20.12.2019