The Global View

2020 Outlook: Moderate Global Returns Amid Slow, But ‘Good Enough,’ Global Growth

Moderation, not fear, will guide investors

In releasing its 2020 Outlook, Northern Trust favors risk assets; expects no recessions and warns not to count out the fed

January 16, 2020 — CHICAGO & LONDON,–(BUSINESS WIRE)–Northern Trust, a leading global asset manager with US $1.2 trillion in assets under management, believes moderation, not fear, will be rewarded in 2020. The firm is currently moderately overweight risk assets and particularly favors exposure to developed market equities and high yield bonds. This is driven by the fact that growth, inflation and monetary policy have moderated. “While growth will be slow, it will be good enough,” said Bob Browne, Northern Trust chief investment officer.

These views are expressed in the firm’s recently released 2020 Outlook. It builds on Northern Trust’s long-term Capital Market Assumptions report, a forward-looking, historically aware five-year forecast that guides the firm’s strategic asset allocation recommendations.

U.S. Equities Favored

The Northern Trust forecast predicts more moderate returns on equities (7.5% for U.S., 8.6% for developed ex-U.S) and bonds (3.7% for investment grade, 7.3% for high yield) after the strong market rally in 2019. While the forecast calls for greater returns from ex-U.S. equity markets – particularly Europe – the firm continues to favor the U.S., which it regards as less risky. This is in keeping with a fundamental investment tenet of Northern Trust: investors should get paid for the risks they take, in all asset classes and market environments.

This favorable view on equities and risk taking is further supported by the current return to earnings growth, which has been fueled by increased global demand, the result of reduced trade tensions and accommodative monetary policy. Browne warned, “Investors who believe that markets should automatically revert to the mean after a strong run should think back just six years, when following a 30% plus return by the S&P 500 in 2013, it returned more than 14% in 2014.”

Steady Bond Returns

Northern Trust expects global bond returns to remain steady based on its belief that interest rates will remain low and credit spreads will remain tight. And, in a view that sharply deviates from industry consensus, the firm believes that there it is fairly likely that the U.S. Federal Reserve will ease, even more than once. “It’s far too premature to have confidence that the Fed won’t cut,” said Browne.

In anticipation of strong demand and manageable default rates, Northern Trust is maintaining a tactical 5% overweight to high yield bonds (relative to long-term strategic asset allocation levels) within its global policy model portfolio. It is funding this overweight high yield position with a corresponding 5% underweight in investment grade bonds. This does not reflect a negative view on investment grade, but rather a belief that high yield is more attractive from a risk/reward perspective. The firm still believes that investment grade is the best risk asset for diversification in periods of market stress.

No Recession, No Yield Curve Inversion

“We expect low yields to keep central banks accommodative, as we believe it would be irresponsible for them to allow the yield curve to invert without either any real inflationary pressures or irrational exuberance on the part of investors,” said Browne. “In fact, we don’t foresee a U.S. recession at least for several years; a main reason why we expect the Fed will be forced into rate cuts in 2020, as they’ll want to avoid yield curve inversion. Amid these conditions, we recommend investors take on duration risk where appropriate.”

While the forecast calls for greater returns from ex-U.S. equity markets – particularly Europe – the firm continues to favor the U.S...

Positive Environment for Global Real Estate/Infrastructure

Outside of equities and bonds, Browne noted that the firm’s global policy model portfolio has a 5% overweight to global real estate/infrastructure because of the high income and diversified risk exposure they offer. “We are a bit more enthusiastic on global real estate, as we expect it to perform better in a moderately risk-on environment.”

“Ultimately, we believe 2020 will be another year of slow global growth – durable enough to avoid recession in EMEA and APAC, but disappointing to those looking for improvement,” said Wouter Sturkenboom, chief investment strategist for Europe, Middle East, Africa and Asia-Pacific at Northern Trust Asset Management. “Our outlook captures our recommendation of a moderate overweight to risk in an environment where growth, inflation, and monetary policy have been moderated. Whilst we expect muted returns, we still expect real returns sufficient to justify risk taking.”

The full 2020 Outlook is available here.

Forward-looking statements and assumptions are Northern Trust’s current estimates or expectations of future events or future results based upon proprietary research and should not be construed as an estimate or promise of results that a portfolio may achieve. Actual results could differ materially from the results indicated by this information.

Capital Market Assumption (CMA) model expected returns do not show actual performance and are for illustrative purposes only. They do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact the future returns. Stated return expectations may differ from an investor’s actual result. The assumptions, views, techniques and forecasts noted are subject to change without notice.

This material is directed to professional clients only and is not intended for retail clients. For European and Asia-Pacific markets, it is directed to expert, institutional, professional and wholesale investors only and should not be relied upon by retail clients or investors. For legal and regulatory information about our offices and legal entities, visit This material is provided for informational purposes only. Information is not intended to be and should not be construed as an offer, solicitation or recommendation with respect to any transaction and should not be treated as legal advice, investment advice or tax advice.




About Northern Trust Asset Management
Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives. Entrusted with more than $900 billion of investor assets, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy. That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management to craft innovative and efficient solutions that deliver targeted investment outcomes. As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.
Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 20 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of September 30, 2019, Northern Trust had assets under custody/administration of US $11.6 trillion, and assets under management of US $1.2 trillion. For 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit or follow us on Twitter @NorthernTrust.
Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at