UBS: Investors should prepare for ‘low returns’ in 2020 as US-China trade war uncertainty weighs on growth
- Growth likely to pick up in second half of 2020, according to UBS Asia-Pacific strategist Niall MacLeod
- Equity valuations gains are likely to be capped at ‘modest’ 7 per cent, MacLeod says
Investors should expect “low returns” next year as companies continue to navigate an uncertain environment created in part by the US-China trade war, according to UBS.
Companies are lowering their risks by cutting costs, delaying future investment, and containing inventory in response to the uncertain trade environment, Niall MacLeod, Asia-Pacific strategist at UBS’s investment bank, said.
Economic growth should pick up in the second half of 2020 after weakening further earlier in the year, MacLeod said, which should help drive a recovery in corporate earnings. Equity valuations, however, will be capped to the upside at a modest 7 per cent, he said.
“We see the bigger recovery in earnings occurring in 2021,” MacLeod said in a research report.
“US-China trade tariffs remain a key uncertainty though, that we believe will ultimately drive the speed and size of the earnings recovery.”