While trade and Brexit risks persist, there will be plenty to keep stock markets happy in 2020

Despite the potential spoilers, 2019 has been a good year, with the MSCI world index gaining some 30 per cent. The world is in transition and even the impeachment process against Donald Trump could turn to investors’ advantage in 2020

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US President Donald Trump arrives at W.K. Kellogg Airport in Michigan to attend a campaign rally on December 18, as the House of Representatives voted to impeach him. Photo: AP

Published: 10:30pm, 23 Dec 2019Updated: 12:31am, 24 Dec 2019

If 2020 is supposed to be the year of improving confidence, political redemption and economic recovery, could it all begin to unravel again quite soon? Events over recent weeks underline the danger of deepening political gloom in the United States, the lasting hangover from the US-China trade war and the high risk of a Brexit shock in 2020.

After hitting record highs, global equity markets might be setting themselves up for an early reality check. There will be upsets and pitfalls along the way, but markets have high expectations. It’s just a matter now of turning hope into the reality of stronger global growth.

So far, markets have done a good job of factoring in the positive news. Despite all the potential spoilers, 2019 has been a vintage year, with the MSCI world index gaining about 30 per cent from the lows late last year. And, if central banks are as good as their word about fast-tracking growth, there’s every reason to stay optimistic.

The US Federal Reserve looks set to hold interest rates steady for most of next year. The European Central Bank remains committed to the notion of even cheaper money and plenty more of it in 2020, the Bank of Japan intends to keep monetary policy super loose and China has plenty of room to ease policy again to support its domestic recovery programme. From a monetary perspective, 2020 should be another bumper year for investors.

The world is in transition and things should turn to investors’ advantage. The impeachment process against US President Donald Trump could even yield favourable results for markets. If Trump has one defining goal ahead of next year’s presidential election, it is to set a positive seal on his term in office.

Top priorities will be ending the trade war with China, boosting US recovery prospects and teasing voters with the prospect of another generous tax giveaway. US growth is currently languishing around 2 per cent but a quick end to the trade war could easily catapult it back towards 3 per cent by the end of 2020.

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