ABN AMRO: ‘Economic break in the clouds justifies balanced investment portfolio for 2020’

Press release -

Based on what appears to be a break in the clouds for the economy, ABN AMRO recommends that investors maintain a balanced portfolio going into 2020. The bank presents an outlook on the new investment year, in which investors are encouraged to limit their exposure to bonds, continue investing in shares, and keep a buffer in cash.

As ABN AMRO Investment Committee Chair Richard de Groot puts it, “We have reason to be slightly more optimistic. When economic growth slumped, investors feared the possibility of a recession this year, but that scenario never came true – by now, the economy is actually on the mend. Recession appears unlikely for 2020, too, as the threat gives way to a period of low but positive economic growth. There are still some risks on the horizon, however, as problems in the manufacturing sector could spill over into other areas such as the services sector. Geopolitical risks also linger. The trade war may yet escalate, and uncertainty is fuelled by the impeachment process against president Donald Trump, the elections in the US, and the Brexit saga.”

Balanced

As such, ABN AMRO recommends a balanced investment portfolio. The first suggestion is to continue investing in shares. The bank points out that in the eyes of investors searching for yield, a dividend of 2-3% will be more attractive than low or even negative interest rates. For the same reason, the recommendation for investors is to limit exposure to bonds. Finally, in ABN AMRO's view, it would be wise to keep a buffer in cash, to be deployed when the encouraging trends outlined above have gained more traction.

Health care and IT

On sector level, ABN AMRO believes that especially health care and IT would be a solid choice, as these are among the sectors that continue to perform well during times of subdued economic growth. Regionally, the bank slightly favours US shares, because of the smaller size of the US manufacturing sector and the country's relative robustness toward shifts in global trade. Within bonds, the bank sees opportunities in investment-grade corporates, which deliver higher returns than government bonds. Finally, interesting opportunities may also be found in emerging and periphery bond markets.

Please click here​ (PDF 4 MB) to read the Investment Outlook 2020.

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