By Gavin Gibbon
After 'spectacular 2019', Maurice Garnier, chief investment officer, Emirates NBD, predicts single-digit growth in 2020
Investors have been warned to expect “modest returns” this year after what has been described by Maurice Gravier, chief investment officer, Emirates NBD, as a “spectacular 2019”.
The Dubai-based bank, which holds assets of over $186bn, has released its investment outlook for 2020, ‘Back to Reality’.
Gravier said: “After a spectacular 2019, propelled by monetary easing meeting excessive pessimism, we expect markets to come back to the reality of fundamentals.”
He added that he expects its allocations to deliver single-digit performances in 2020, close to their long-term expected returns and to the nominal global GDP growth.
“We expect positive but modest returns. It’s not a double-digit year. It might even be the last positive year, we might get into trouble after that, but let’s say four to six percent,” he said.
In terms of oil, the report forecasts Brent prices to record an average of $57 per barrel, an annual drop of 11 percent compared to 2019; while WTI is expected to fall by four percent to around $55 per barrel.
However, Gravier warned: “We have one nightmare scenario, which would be to see oil prices collapsing. It’s our worst case.
“If we see that, we will probably see some defaults in the high yield fixed income, which would probably translate to other markets.”
Although he tempered that by saying any potential election of Democrat candidates Elizabeth Warren or Bernie Sanders as US President in November, would have a positive impact on markets.
“That’s how it is, you have a worst case, you have a best case,” he said.
Gravier said valuations are “too elevated, especially in developed markets, to expect any further expansion”, and although he suggested a global recession is not expected this year, geopolitical tensions, the aforementioned US presidential elections and the current coronavirus all have the ability to impact the outlook for the year.
“Geopolitics, it has switched, it used to be trade war and Brexit, now we’ve started the year with military tension with Iran and now it’s the coronavirus,” he said.
Gravier also said the outlook for 2020 favoured investment in emerging markets, which, according to the report, contributed more than two-thirds of global growth and emerging market debt has delivered consistent returns over the last decade.
He said emerging markets “grow faster with strong domestic drivers” and offer “cheaper valuation”.