Higher Growth, Inflation Questions, and Improved Capex.

Alternative investment manager BlackRock (BLK) has issued the Blackrock 2020 forecast.

The firm believes that growth will pick up next year with little risk of inflation. They also warn that the years of friendly central bank policies could be behind us and that inflation risks are underpriced.

BlackRock analysts also think that the biggest risk to the firm’s outlook is a gradual change in the macro regime like growth flatlining as inflation rises. This could reduce the negative correlation between stock and bond returns over time, making bonds less effective as a diversification tool.

The BlackRock 2020 Forecast

The report has a favorable outlook for risk assets.

BlackRock analysts wrote: “The expansion of valuation multiples that powered equity markets higher in 2019, and the dovish pivot by central banks that helped offset the downdraft from rising global trade tensions look to be behind us. Instead, we see growth ticking up and protectionist pressures going sideways. Coupled with what appear to be reasonable valuations across equities and credit, we believe this should pave the way for modest returns in global risk assets.”

The authors also note: “We believe a rebound in global trade and CAPEX should pave the way, tactically, for stronger performance of cyclical assets such as Japanese, emerging market and Canadian equities.”

The key risks to this suggestion are U.S.-China trade talks break down or China fails to deliver on even modest stimulus expectations,” according to the report.

Finally, you can access a copy of the full report here.

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