After saying goodbye to the bright 2019 of most asset classes, looking back on the agencys prediction of last years financial market, some of them have been perfectly fulfilled, some of them are still far from the target point, some of them are wrong, which reminds us not to be too superstitious about the prediction of an agency; however, this does not mean that the market prediction is useless; just, compared with the prediction of the market by the agency In the low market, we might as well pay more attention to their analysis logic and the general judgment of the market direction.
Lets take a look at the institutions with accurate forecasts of gold, foreign exchange, crude oil and stock market in 2019, as well as what the mainstream institutions think about the market in 2020.
Looking back at the major investment banks forecasts for the price of gold in 2019, most of them were slapped. Gold prices were relatively stable in the first half of 2019, but by the beginning of July, the international environment had changed dramatically. With the rising risk aversion, gold prices soared all the way. Due to trade frictions, looser monetary policies of major economies in the world and purchases from exchange traded funds and central banks, spot gold rose by more than 18% in 2019, the largest increase since 2010, outperforming most commodities. Driven by the one-year trade dispute and three interest rate cuts by the Federal Reserve, this traditional safe haven stands out.
However, at the end of 2018, most institutions were only cautious about bulling gold, believing it would rise moderately in 2019. At that time, analysts at Citigroup predicted that the average price of gold in 2019 would be $1270; in the report, UBS predicted that the price of gold could rise to $1300 an ounce in 12 months.
Analysts of Credit Agricole predicted that the target was relatively close
The banks strategists, Valentin Marinov and Manuel oliveri, wrote a report at the end of 2018, suggesting buying gold at $1240 an ounce and long-term bulling, with a target of $1420 per ounce and a stop loss of $1150 per ounce. In their view, global inflation expectations will continue to play an important role in the long run; gold tends to perform well as long as major central banks avoid much ahead of market action. Unfortunately, the two analysts have not expressed a clear view on the gold price forecast for 2020 in the near future.
At the end of 2018, the investment banks prediction of the gold price in 2019 is based on the assumption that interest rates may rise in 2019, or at least remain at the same level; however, on the contrary, the Federal Reserve was forced to cut interest rates three times.
As 2020 approaches, BlackRock, the worlds largest money manager, remains positive about gold as a hedging tool, while Goldman Sachs and UBS expect prices to climb to $1600 an ounce, the highest level since 2013. Despite this, the global stock market is still active and the US labor market has proved resilient. However, with the uncertainty of the central banks possible actions in 2020, the outlook for gold is still uncertain. As the global economy accumulates momentum, Morgan Stanley said that the global economic recovery in 2020 will suppress the price of gold.
Russ koesterich, portfolio manager of BlackRocks $24 billion global allocation fund, said that economic growth and inflation are still moderate and central banks continue to tend to loose policies. In this environment, any impact on stocks may come from concerns about economic growth or geopolitics. In both cases, gold may prove to be an effective hedge.
Many investment banks are optimistic about gold performance in 2020
Goldman Sachs: the reason for diversified allocation of gold is unprecedented strong
Goldman Sachs said investors should diversify their long-term bond portfolios into gold, which will be boosted by worry driven demand.. Sabine Schels, an analyst at Goldman Sachs, said in a report in early December of 19 that gold could not completely replace the Treasury bonds in the portfolio, but the reason for changing some conventional bonds into gold was unprecedented strong. We still expect gold to have room for growth, because the worries about entering the post cycle period, as well as the rise of political uncertainty, may support the defensive assets based on gold Investment demand. There is still room for further correction of gold price, maintaining the expectation of rising to $1600 in 2020.
JPMorgan: gold price is expected to reach 1724 USD / oz in 2020
ANZ: affected by geopolitical and economic risks, gold price is expected to reach 1600 US dollars in 2020
Royal Bank of Canada: gold price will exceed 1600 USD / oz in 2020
Christopher louney, commodities strategist at Royal Bank of Canada, believes that in 2020, the price will exceed 1600 US dollars / ounce more than once, and the average price in 2020 is expected to be 1500 US dollars / ounce. At present, the gold ETP (exchange traded products) position has exceeded the 2012 high. We believe that after a certain degree of price integration, the gold allocation will still be favorable in the future.
Dutch international group: the average price is expected to be 1475 US dollars per ounce in 2020
In its 2020 commodity outlook, ing said gold prices will continue to be supported throughout 2020 due to uncertainties surrounding trade and global growth. By 2020, gold will be well above the new floor of $1450 an ounce, but not much higher than $1500 an ounce.
Warren Patterson, head of commodity strategy at ing, and Wenyu Yao, senior commodity strategist, said in the report that looking forward to 2020, uncertainty surrounding trade negotiations and global economic growth may still be the main driving force. Gold is expected to average $1500 an ounce in the first quarter of 2020, dropping to $1470 in the second and third quarters and rising to $1480 in the fourth quarter. By 2020, gold prices will average around $1475 an ounce.
The strategists added that the potential for further gold price increases will depend on the Feds choice in 2020. We do believe that gold prices will be higher than current levels due to trade uncertainty and concerns about global economic growth. However, if the Fed becomes more and more dovey, this will only lead to further gold gains.
The outlook for 2020 is based on the strong performance of gold this year, which rose 21% in 2019, the report said. Given the increasing uncertainty in the global economy, the slowdown in economic growth and the escalation of trade tensions, such a strength should not be too surprising. These factors add to the appeal of safe haven assets such as gold. In addition, the more moderate policies of central banks also provide support for gold prices.
Morgan Stanley: economic recovery will suppress gold price in 2020
Take a cautious stance on gold, because the global economic growth in 2020 will suppress the gold price throughout the year; however, the weakening of the US dollar may provide some support, and trade uncertainty is still a major upward risk; it is predicted that the gold price in 2020 will be 1499 US dollars / ounce, and then it will be lower in the longer term.
The price of gold is expected to be US $1515 / oz in the first half of 2020, based on the expectation that international trade tensions will ease. Gold could fall to $1394 an ounce if the controversial tariffs are removed. But if it continues to fall, it will also attract buyers back to the market. A weaker dollar would also help gold bulls. The main driver of gold prices in the short term remains real interest rates. The Fed is expected to keep interest rates unchanged by 2020. The rise of the stock market and the pressure on safe assets indicate that the market has opened a high-risk preference mode.
Entering 2019, the market generally expects the dollar to weaken as strategists point out the potential downward pressure on the U.S. economy and the prospect that the interest rate advantage of the dollar may shrink. However, this prediction is largely unrealized: Although the currency market digested all kinds of events in 2019, the US dollar index fell only slightly in 2019, with a rise of 3.2% in the year. In G10 currencies, the pound and Canadian dollar led gains while the euro lagged behind.
According to dailyfx, the Canadian dollar was the strongest of the major currencies in 2019, thanks to the central banks neutrality and strong oil prices as other central banks relaxed. The second was the pound, which hit a three-year low against the U.S. dollar in September, but rebounded in retaliation in the last quarter on the expectation that the election would lead to a smooth exit from Europe. The euro is the weakest of the major currencies in 2019 as ECB policy is further relaxed and economic data is weak.
In the fourth quarter of 2019, the worst quarter for the US dollar since the beginning of 2018, the first phase of trade agreement between China and the United States and the improvement of the prospect of brexit prompted traders to turn to riskier assets. However, some institutions believe that the dollar is likely to strengthen if other economies continue to struggle and currencies such as the renminbi and the euro fail to achieve significant gains.
As we enter the new year, the consensus forecast is still a weaker dollar, but more cautious. JPMorgan analysts expect the dollar to weaken, but say it will not expand to a dollar bear market. While improvements in global risk appetite usually weigh on the dollar, Goldman only expects moderate weakness. Morgan Stanley predicted that the weak dollar ahead will give way to the recovery momentum in the second half of the year.
The three most accurate investment banks think its not time to give up the dollar
At the end of 2019, some people on Wall Street believed that the outlook for the US dollar was even bleaker due to the decline of trade tensions and signs of economic recovery outside the US. Betting on a weaker dollar against the euro is one of Morgan Stanleys top deals, and UBS global health management predicts the euro will appreciate about 7% from its current level to reach $1.19 by the end of 2020.
Jane Foley, head of foreign exchange strategy at Rabobank, the most accurate analyst in Bloombergs quarterly survey from July to September 2019, said that in the first few months of 2020, the trend of the dollar may be stronger than the market expectation, and then it will weaken, but the extent of the decline will not be as large as the market expectation.
Foley forecasts that by mid-2020, the euro will be at 1.08 against the US dollar, down about 3% from its current level, and below the consensus expectation of 1.13. She expects the fed to loosen policy later next year, with the euro climbing to $1.13 by the end of 2020. But the Fed itself said it would stay put for the full year 2020.
Changes in emerging market debt will drive demand for the dollar, Foley said. According to the international financial association, the dollar denominated debt of 21 major emerging market economies has surged from $2.9 trillion in 2008 to about $6.1 trillion. Goldman Sachs believes the trend will continue in 2020. Over the years, some structural factors affecting the trend of the US dollar have not been fully taken into account by the market. The growth of emerging markets, especially in Asia, makes the US dollar have a huge demand that it has never had before.
Foley is not the only one who thinks the dollar will stay in good shape next year.
Westpac bank, which forecasts the second most accurate G-10 currency trend, also believes that the dollar will remain strong at the beginning of 2020 and then fall.
Barclays, which ranks third in terms of forecast accuracy, predicts that the dollar will rise against the euro throughout 2020.
In a report in mid December 2019, analysts at Goldman Sachs, including Zach pandl, CO head of global foreign exchange and emerging market strategy, wrote that the market was enthusiastic about shorting the US dollar. If the US dollar is to depreciate significantly, then the euro and RMB must appreciate significantly. At present, we believe that there is no convincing reason for both.
Barclays expects the euro to fall to 1.07 against the dollar by the end of 2020, about 4% below its current level. After the first phase of trade agreement between China and the United States, both banks kept their exchange rate outlook unchanged. Nikolaos sgouropoulos, a strategist at Barclays, warned that investors could face risks if they think the dollar will continue to weaken. We are increasingly concerned that the market may misinterpret the recent weakening of the US dollar as a trend of the new year, and may therefore bear the painful consequences of short selling.
Latest views of other investment banks on US dollar
Citigroup (ebrahmahbari, other strategist, December 11, 2019 report)
Given that the U.S. economy will continue to outperform the rest of the world, the bank remains a non consensus dollar bull
After the signing of the first phase of the trade agreement between China and the United States, the enthusiasm for short dollar trading is high, but at least in the next few months, we have no confidence in the bottom-up situation.
The market had expected the euro to rise about 5% in 2019, but the euro fell against the unexpectedly strong US dollar, which caught the market by surprise. Worries that trade frictions could spread to Europe, brexit and weak global economic outlook have put pressure on the euro.
Analysts polled by Bloomberg expect the euro to rise more than 4% against the dollar in 2020, making it the best performing currency in the world. The improvement of the global economic outlook and the easing of political tensions are expected to be positive.
One of Morgan Stanleys top deals in 2020 is to long the euro, as do analysts at institutions such as UBS wealth management and Credit Agricole. The options market shows that peoples confidence in the euro has increased. In addition, with signs of improvement in US China trade relations, risk appetite has generally increased.
Stephen Innes, strategist at axitrader limited, said that the euro was particularly sensitive to the theme of improving global economic growth against the US dollar. With the positive impact of trade optimism on global growth, trend momentum may start to drive the euro higher.
Jens Peter Sorensen, chief economist at dansk bank, predicted that by the end of 2020, the euro would move slowly towards the target of $1.15 against the dollar, and he was cautious about being overly optimistic as the European Central Bank maintained its policy easing stance. We have a good view of the euro, which is expected to fluctuate in the first quarter against the US dollar. Despite the first steps towards a trade agreement and the orderly brexit of the UK, and signs of stabilization in the global economy, this fragile recovery still requires a lot of stimulus, especially in Europe.
Crude oil market
2019 is a turbulent year for the oil market. After the short-term rise at the beginning of the year, the oil price did not continue to rise unilaterally, but fell into continuous shock. On August 1, oil prices fell the most in four years as trump threatened to impose more tariffs on China, and then rose the most in more than a decade in September as Saudi Arabias key oil facilities were attacked.
For the average price of Brent crude oil in 2019, at the end of last year, Citi predicted $60 / barrel, and EIA expected $61 / barrel, which basically coincided with the actual situation; Goldman Sachs and Bank of America Merrill Lynch had predicted $70 / barrel, which was obviously too optimistic.
Looking forward to oil prices in 2020, analysts pointed out that oil prices in 2020 will still be restrained because the impact of OPEC + production reduction will be offset by the increase in production in other countries, and the demand prospects are different. Analysts believe oil prices will rise in the middle of the year as emerging market demand increases and OPEC + production cuts cut global inventories. The market was surprised by Saudi Arabias further supply cuts in early December 2019, coupled with indications that the thaw of the Sino US trade conflict could stimulate demand, leading some leading analysts to raise their oil price forecasts.
According to analysts forecasts since OPEC + early December meeting, WTI crude oil price is expected to be $58.50 per barrel in 2020, while the current level is about $60, and the average level so far in 2019 is $56.95. Brent crude is expected to average $64.25 a barrel.
A Wall Street Journal survey of 13 major investment banks at the end of December 2019 found that analysts expected oil prices to fall next year as OPEC + production reduction agreements failed to boost oil prices. Despite the increase in production cuts, investment banks expect Brent crude to average $61.23 a barrel in the first quarter of 2020, only slightly higher than last months forecast. But in the short term, investors are bullish on oil prices. Last week, net long positions betting on higher crude oil futures rose to their highest level in seven months.
In the past December 2019, the oil price showed a steady slow bull market. In the whole 21 trading days of December, Brent crude oil has only 5 times of negative line. On the one hand, the continuous rise of oil price is closely related to the deepening of production reduction agreement reached by OPEC + at the beginning of December. In addition, the Sino US trade negotiations frequently spread good news, and the improvement of macro environment also laid the foundation for the strong crude oil price.
Just after 2019, the risk of geopolitical conflict in the crude oil world ushered in a climax at the beginning of the new year. In the early morning of January 3, the U.S. military launched air strikes on two targets linked to Iran. As soon as the news came out, oil prices skyrocketed, with Brent and WTI oil prices rising by more than 4%. In conclusion, the current fundamentals support a strong oil price, and should not be pessimistic about medium-term prices.
Latest opinions of four institutions with accurate crude oil forecast in 2019
The world bank was the first to give oil price forecast for the new year at the end of 2018. According to the bank, the most important factor in 2019 will be the lack of spare capacity in OPEC, especially in its member countries. If the sudden shortage of oil supply increases the possibility of oil price soaring in 2019, the lack of oil production capacity will provide a limited buffer for oil price.
According to the world bank, the average price of crude oil in 2019 is US $67. At present, the forecast is the closest to the actual situation. In the first quarter of 2019, the average price of oil distribution is US $63.3, the second quarter is US $68.3, the third quarter is US $61.9, and the fourth quarter is US $65; the annual average price is about US $64.2.
At the end of October 2019, the World Bank released the oil price forecast report, predicting that the crude oil price in 2020 is expected to be 58 US dollars / barrel, a significant reduction of 7 US dollars / barrel compared with the previous forecast. According to the World Bank report, the reduction of crude oil price expectation shows that the global economic growth prospects are bleak and crude oil demand is insufficient. The report predicts that the United States will significantly increase crude oil production; OPEC + countries are expected to reduce production; and global crude oil demand may be significantly reduced.
US Energy Information Agency (EIA)
At the end of 2018, the EIA predicted that the average price of oil distribution in 2019 would be $61, which is not very different from the reality as a whole. Looking forward to the market in 2020, EIA estimates that the average price of Brent crude oil in 2020 will be $61 / barrel, down from $64 / barrel in 2019, because the global crude oil inventory is expected to rise, especially in the first half of 2020.
At the end of 2018, Citi predicted that the average price of Brent crude oil in 2019 would be $60 / barrel, and the oil price would fluctuate sharply in 2019; the bank said that the increased production of US crude oil would offset the output cut by OPEC. At present, this forecast is close to the status quo. In 2019, the U.S. will increase 1.2 million barrels per day, roughly equal to OPECs daily production reduction.
With regard to oil prices in 2020, Citigroup believes that OPEC + production reduction will support oil prices and demand will recover. The possibility of Brent crude oil average price reaching 73 USD / barrel in the first quarter of 2020 is 30%, but the basic expectation is still 63 USD / barrel. The completion of the first phase of the trade agreement is likely to increase global oil demand by 500000 barrels per day over the base case.
In mid December 2019, JPMorgan raised its oil price forecast for 2020, and the Bank predicted that OPECs production reduction measures would effectively combine with the expectation of emerging market economic growth. The oil market is expected to run a deficit of 200000 barrels per day in 2020, rather than oversupply. This is in sharp contrast to Septembers forecast, which assumes an oversupply of 600000 barrels per day in the oil market by 2020. Global oil demand is expected to grow by 1 million barrels a day, the same forecast as in September.
JPMorgans latest forecast for the benchmark price of Brent crude oil in 2020 is $64.50 per barrel, higher than the previous forecast of $59 per barrel, and the WTI crude oil price is expected to reach $60 per barrel in 2020.
Global stock market
In 2019, with the global interest rate cut as the Dongfeng, the risk assets are full of bull spirit, and the major stock indexes in developed and emerging markets are all higher. As central banks cut interest rates and restart their money printing programs to fight the economic slowdown, the value of global stocks has increased by more than $10 trillion. In 2019, the msciacwi global index gained 27.3% in 2019. The performance of US stocks was much better than expected by Wall Street. The S & P 500 and Nasdaq both recorded their largest annual percentage increase since 2013, while the Dow Jones index recorded its largest annual percentage increase since 2017. Trade optimism, dovish monetary policy and improving economic prospects drove stocks higher.
Deutsche Bank: end point of S & P unchanged in 2019 and 2020
Binky Chadha, Deutsche Banks chief global strategist, is the largest U.S. equity bull on Wall Street, and his 2019 S & P 500 target is by far one of the most accurate forecasts on Wall Street. Chadha predicts that by the end of 2020, the S & P 500 index will reach 3250, the same level as he predicted in 2019.
In the report, Chadha pointed out that stock traders have included the macroeconomic data and the rebound of corporate profits too early, which may keep the S & P 500 index within the range in 2020. What is the market pricing? Current valuations reflect their bets that the ISM index will rebound to around 57, with earnings up 15%. Despite signs of a sustained slowdown in both, the S & P 500 still climbed to an all-time high, indicating that the market has factored in a fundamental rebound.
Chadha predicted that corporate earnings would pick up much more slowly. He predicted that the earnings of the S & P 500 index would increase by only 6% to $175 per share in 2020. Meanwhile, corporate stock buyback cuts, the US presidential election and the lingering trade friction risks may reduce investors willingness to pay a high premium for stocks.
The U.S. presidential election will make it difficult to completely dissipate the fundamental uncertainty brought about by its trade policy. These policies plague businesses and are a key driver of slowing growth in the United States and around the world. This indicates that the downward trajectory of economic growth will break through and rebound, but it will not rebound to the peak of this cycle that the market has priced.
Goldman Sachs fund managers, who have successfully predicted the rise of the stock market in 2019, are optimistic about Europe this time
Shoqatbunglawala is head of global portfolio solutions for Goldman Sachs asset management in Europe, the Middle East, Africa and Asia Pacific. In an interview a year ago, Bunglawala recommended buying U.S. and emerging market stocks, even as global stocks plummeted amid concerns about tightening monetary policy and slowing economic growth. The S & P 500 is up 26% this year, while the MSCI Emerging Markets Index is up 13%.
Bunglawala said investors were too pessimistic about Europes growth prospects. In early November, GSAMs global multi asset fund shifted to over allocation of cyclical stocks in the eurozone. Europe will avoid recession, which will help cyclical stocks. The expectation of market digestion seems to be more negative than we expected. Bunglawala is particularly keen on eurozone banks, which he says have not been recognized for their non-performing loans and improved capital levels. The Stoxx bank index in Europe is up only 11% this year, about half the rise in the Stoxx 600 index in 2019, as the industry is suffering from negative interest rates. The fund managers view on the overall market trend in the new year is the same as that of major institutions such as BlackRock. He believes that in 2020, he should continue to be bullish on risk assets, although the increase may be far less than that in 2019. Source: editor in charge of huitong.com: Liu Songgou nbj9949
Bunglawala said investors were too pessimistic about Europes growth prospects. In early November, GSAMs global multi asset fund shifted to over allocation of cyclical stocks in the eurozone. Europe will avoid recession, which will help cyclical stocks. The expectation of market digestion seems to be more negative than we expected. Bunglawala is particularly keen on eurozone banks, which he says have not been recognized for their non-performing loans and improved capital levels. The Stoxx bank index in Europe is up only 11% this year, about half the rise in the Stoxx 600 index in 2019, as the industry is suffering from negative interest rates.
The fund managers view on the overall market trend in the new year is the same as that of major institutions such as BlackRock. He believes that in 2020, he should continue to be bullish on risk assets, although the increase may be far less than that in 2019.