GBP/USD hits 1.200
Having violently unwound the pre-election melt up in just a couple of trading sessions, we see GBP/USD continuing it’s decline through 2020.
A combination of weaker UK data and flight to safety of the US dollar will be the biggest drivers, notwithstanding any unforeseen shocks from a disorderly Brexit.
Gold rallies to $1800
2019 was a stellar year for gold and this is likely to continue into 2020 as geopolitical risk remains elevated.
In addition, the Federal Reserve is considering letting inflation run past its 2% target rate and while Donald Trump is in power we’re unlikely to see any meaningful tightening cycle leading to a more subdued dollar.
UK Small Caps outperform the FTSE 100
The FTSE 100 is very fairly priced going into 2020 and it’s hard to see a scenario where London’s leading index provides significant upside in 2020.
By contrast, London’s small cap indices, including the AIM market, have been unloved for many years and there are numerous hidden gems presenting excellent value.
Brent Oil price crashes to $45
Now the Saudi Aramco is out of the way, Saudi Arabia has less reason to keep oil prices high and OPEC are unlikely to implement much more in the way of supply cuts.
The global economy is also set for slower growth in 2020, reducing demand for oil.
Adding to downside pressure in the oil price is the march higher in US shale production which will likely see the US become a net exporter in 2020.
Impact investing goes mainstream
ESG is now fully embedded into the investor mind set at an institutional level but in 2020 we see this filtering down to the investment decisions of private investors in a big way.
Impact investing is far more than allocating a portion of your portfolio to renewable energy projects. 2020 will see a major turning point in value creation by businesses actively making a positive impact towards the UN’s 17 Sustainable Development Goals.