What was the outgoing 2019 year like and what to expect from 2020

Looking back at the events of the outgoing 2019, let’s recall several important points which either have a direct impact on further development or give interesting signals in which we can consider the prospects of the upcoming future. Taking them into consideration, we will try to make some forecasts for the new 2020 year.

Slowdown in global economic growth

The main result of 2019 in the global economy - a significant slowdown in growth from 3.2% in 2018 to 2.6% this year. Acording to analysts the most important reasons for it are trade wars and a severe weakening of growth in China.

An alarming situation in Europe as a whole, and in its individual parts. Major economies such as Germany and Italy are dangerously close to recession. The emerging certainty with Brexit prevented the risk of negative growth in the British economy, but still scarcely inspires optimism.

Japan's real GDP growth rate accelerated from 0.3% in 2018 to an estimated 1.1% in 2019. However, the growth is expected to turn negative in the fourth quarter as a result of a sales-tax rise from 8% to 10%.

The US economy grew faster than in most other developed countries. Therefore, the difference in interest rates between the US, on the one hand, and Europe and Japan, on the other, favors dollar-denominated assets.

In the situation of uncertainty, when investors are nervous, they prefer the “safe haven”, which is the US dollar. It means that they tend to invest in American bonds and stocks, which leads to a rise in the dollar.

The trade war has exacerbated this phenomenon. Attempts to increase the competitiveness of US companies by raising tariffs for non-US suppliers will be counterproductive.

Trend (or potential) growth of the US economy in 2020 is expected to be around 2.0%. Preparations for the forthcoming presidential elections may bring some political surprises (both positive and negative) that might affect the outlook.

As for the prospects for China's economy, growth is expected to fall, which is considered to be a record for the past three decades (below 6% for the first time since 1990). The easiest way is to attribute everything to the consequences of the trade war. But the decade-long slowdown suggests that this is the result of both structural and cyclical factors. World Population Ageing and a sharp drop in productivity growth mean that potential growth in China is now lower than a decade ago. China's growth rate is forecast to slow even further next year, to 5.7%.

Negative rates - mainstream in banking

Perhaps more eloquently than other indicators, the situation in the banking sector is evidenced by the following fact: in 2019, more than 50,000 employees were dismissed. Deutsche Bank, HSBC, Banco Santander - mainly European banks have announced massive job cuts. Among the factors that have caused this situation are negative interest rates, slowdown in economic growth and competition from fintech companies.

Negative interest rates are becoming mainstream. In most European countries and Japan, the current deposit rate is below zero. That is, in fact, depositors pay for the storage of money, and borrowers receive a reward. This paradox has extended to the bond markets, causing many yields to drop to zero or below.

Economists believe that in the US, federal funds rates in 2020 are more likely to fall than rise, but remain above zero. In Europe, rates will remain negative in 2020; moreover, they may become even lower.

Events, Brands, People.

Boeing and Airbus. The disaster changes alignment of power.

On the morning of March 10, Ethiopian Airlines' Boeing 737 Max 8 crashed 60 kilometers from Addis Ababa six minutes after takeoff. 157 passengers died. This crash was the second for this type of aircraft in five months. After the second disaster, the leading airlines of the world refused to use the Boeing 737 Max, and 40 countries in 2019 banned the aircraft from flying over their territory. The company, of course, promised to find the cause of the crash and fix it.

Anyway, Boeing's quotes fell by 11% after the tragedy. The aircraft manufacturer, which operated in 2018 with a profit of $10.46 billion, will end 2019 with a loss. When making a forecast for 2020, it is very difficult to find reasons for optimism.

But for the main competitor of the American company, the European manufacturer Airbus, the prospects are seen exactly the opposite.

Tesla: promises and numbers.

In October, Elon Musk announced that Tesla would release its long-promised Full Self-Driving package until the end of the year. At the moment, this has not happened, and the head of the company also does not issue clarifying information about the timing.

Everyone is used to Musk's spectacular statements and the fact that the order of fulfillment of promises is always extremely flexible. But how does this affect the company's economy?

Telsa's 2019 financial results are inconsistent. In the first 9 months of 2019, the company worked at a loss of $967 million, not far from last year's billion-dollar loss at the end of the year.

However, in the second half of 2019, there was an unexpected reversal. The third quarter Tesla made a profit. The manufacturer of electric cars will end the year, of course, with a loss, but less than in the previous one.

Is there cause for optimism? Let's assume yes. Moreover, both for Tesla and other participants of a promising market.

Cryptocurrency and Facebook

Last summer, Zuckerberg announced global cryptocurrency from Facebook, known as Libra. It was announced that it would be launched in early 2020. Now those plans are falling apart. Partners leave; regulators do not welcome this scheme.

In the new year, we should expect new high-profile statements from Facebook about new promising directions. What will it follow and in general whether things will go beyond the announced plans - there are reasonable grounds for skepticism.

As for predictions about the future of cryptocurrencies, in particular, can we expect something from the global tech. giants in the coming years that can displace Bitcoin from its leading position? Perhaps, not.

But in general, the digital currency market in 2020 has very high chances for growth. No one guarantees stable progressive growth for all coins and all investors. Perhaps in this market you should expect the most off-putting swings.

The upcoming 2020 promises to be exciting.