Big factors that will hit investments this year, from Brexit to trade wars
Low interest rates mean many investors have to search hard for returns, writes Louise McBride
As 2020 unfolds, investors could face much more volatile stock markets than they did last year. "2020 doesn't look to be as good a year for investment returns as 2019 was," said Andrew Milligan, head of global strategy at Aberdeen Standard Investments (ASI).
"Stock market sell-offs are likely. 2019 was a relatively calm year - it did not have the big market sell-offs which 2018 had. If you are investing in equities, expect some sort of big [stock market] shock at some point in 2020, as we are almost overdue one."
While there are some upsides for 2020 -including record-low unemployment in many countries and a de-escalation in, and possible end to, the trade war between the US and China - investors still face big challenges.
The uncertainty around Brexit remains. There are fears that the lull in the US-China trade war could be short-lived. Investors are facing another year of zero to below-zero interest rates - indeed, 2020 will be the 11th year of record-low European rates. These dismal rates make it very hard for many investors to achieve returns - unless they take on more risk.
"The only way to make a high return in these markets is to trade very significantly, which has a lot of dangers, to invest in less liquid assets, or to invest in riskier assets, such as private rather than public assets," said Mr Milligan. "You might also make a good return by investing in some emerging market assets - though this comes with a currency risk. It's important to decide how much risk you are comfortable taking on."
So, if you want to increase your exposure to investments that are likely to deliver better returns than deposits, which ones could make money in 2020?
A number of investment experts believe emerging market equities could do well in 2020. These equities are the shares of companies listed, or largely active, in emerging or developing economies, such as Brazil, Russia, India and China. Some shares can offer investors the opportunity to make significant returns - but equally, it is also possible to lose a lot of money.
"Assuming relative political stability and continued moderate economic growth, ASI likes emerging market equities and emerging market bonds generally - on the assumption there's a recovery in global trade in 2020," said Mr Milligan.
Emerging market bonds - such as those of Brazil, South Africa and Indonesia - could be worth investing in, according to Peter Brown, co-founder of Baggot Investment Partners.
"These bonds still have an interest rate on them and interest rates can be as high as 10%," said Mr Brown.
"You have a currency risk when you buy emerging market bonds, but that currency risk usually eases when the US dollar weakens. I think the US dollar will get weaker in 2020."
Barclays is more cautious on emerging market equities. "Emerging markets have generated disappointing returns of late," said Barclays in its latest global economic outlook.
"Some green shoots have started to appear, but another three or six months may be necessary to reassure investors.
"While growth forecasts for advanced economies have been falling, emerging markets, excluding China, should provide a source of improvement in 2020.
"Investors, as always, will need to be very selective on regions and cognisant of risks."
As with any share investment, it could be a big mistake to invest directly in a small number of emerging market stocks.
So should you wish to gain exposure to emerging markets, it is usually best to do so through a diversified investment fund - and after getting some independent financial advice.
Be sure also to fully understand the risks of any bonds you are considering.
Japanese equities could do well this year, according to ASI and the global investment manager Blackrock. The de-escalation of the US-China trade war is expected to boost Japanese shares - as would a recovery in global trade and continued moderate global economic growth.
A deep slowdown or a stepping up of trade disputes, however, may damage Japanese shares.
Some believe that 2020 could be a better year for European shares than US ones - though Brexit and the upcoming EU-UK trade deal talks might take their toll on European equities.
"There's value in European equities," said Brown. "By contrast, US equities and the dollar are overvalued. Going forward, we think it will be risky to have exposure to US equities and the US dollar. The US stock market should stagnate but the European stock market should do well."
US stocks have delivered good returns for many investors over the past five to 10 years - but some believe this is unlikely to continue and that lower returns should be expected for US shares in the coming years.
A number of investment managers, including Blackrock, are cautious about US equities due to the upcoming presidential election.
"The US presidential election could impact financial, energy and healthcare stocks - as well as FAANG (Facebook, Amazon, Apple, Netflix and Google) stocks," said Milligan.
"The regulations may change in these areas after the election. That would affect US companies and EU companies with US bases."
Barclays, however, believes US shares could perform well in 2020 - though it acknowledges the outcome of the presidential election will have a significant impact on the American economy in the coming years. "US equities have outperformed strongly over the past five years," said Barclays in its global outlook for 2020. "We see little reason for this to change."
Some expect semiconductor stocks to do well this year, particularly those linked to 5G. Companies who make semiconductors - an essential part of all electronic devices - include Intel, Qualcomm and Samsung.
Over the past year and a half, many semiconductor companies have been hit by the trade tensions between the US and China.
However, with these tensions easing, demand for semiconductors could increase in 2020.
"The technology stocks ASI likes are the simpler 5G, smartphone and semiconductor chip-related stocks," said Mr Milligan.
"With 5G becoming more popular in many countries, it looks possible there will be an improvement in that sector."
Amazon is one of the shares being tipped by Goodbody for 2020.
"Despite the relentless advance of e-commerce, the performance of Amazon shares has significantly lagged FAANG peers and broader US markets in 2019," said Jerome Kavanagh, senior trading strategist with Goodbody.
"Heightened regulatory scrutiny of the company and sector has undoubtedly dented investor sentiment. Likewise, rising costs have weighed on [Amazon] profits in recent quarters. We believe these risks are now fully captured in the share price. Hence, we see the recent [share price] weakness as a buying opportunity."
Walt Disney is another of Goodbody's stock picks for 2020. "Early subscription numbers to Disney+, Walt Disney's new streaming service, have greatly exceeded expectations, which bodes well for the international rollout of the service in 2020," said Mr Kavanagh.