A few months can really make a difference in the financial markets – in recent months for the better.

Market sentiment was bleak in August 
The US-China trade war was escalating and signs of weakness in the global economy were becoming more pronounced, while yields hit new lows in Europe and equity prices fell.

Optimism has now gained a significantly firmer footing
Political risk has eased following US-China negotiations on a partial deal in the trade dispute, while a number of positive economic key figures and more accommodative monetary policies from the central banks have  resulted in a slightly brighter outlook. This has sent both yields and equity prices higher.

Overweight maintained in equities 
Recent trends generally support Danske Bank’s expectation that equities still have a reasonable return potential in the coming year. Therefore we are maintaining a slight overweight in equities in our portfolios and a matching underweight in bonds – and we see the most attractive return potential in US equities.

Upswing still on track 
Equities are benefiting from the still ongoing upswing, which in the US has lasted more than 10 years, making it the longest upswing since World War 2. “However, we are in the late phase of the upswing, and the years of highest growth are now behind us. Nevertheless, in our view the upswing still has some time to run before the economy turns south – at least 12 months and potentially longer, which provides a foundation for further equity price rises in 2020,” says Danske Bank’s chief strategist Henrik Drusebjerg.

Do not expect a repeat of 2019
“Despite now being in a better place than a few months ago, the outlook is not completely rosy when looking ahead to 2020. While we expect a reasonable return from equities, investors should probably count on significant volatility along the way and should absolutely not expect returns to be on the same scale as we have seen this year – but less can also be enough,” says Henrik Drusebjerg.

This content is not investment advice - you should always speak to an advisor about how a possible investment matches your investment profile before making an investment.