A look inside the 2020 political crystal ball
It’s that time of the year again, when gurus from all walks of life bring out their crystal balls to tell us what is in store for the year ahead. When I took mine out of the closet to look into the new year, I found myself looking at a rather blurry...

It’s that time of the year again, when gurus from all walks of life bring out their crystal balls to tell us what is in store for the year ahead. When I took mine out of the closet to look into the new year, I found myself looking at a rather blurry image. However, I am not disheartened and I will inform you of some of the key changes we can expect for the year to come, with the ebbs and flows along the way.
What stands out for sure is that the importance of political events in recent years will loom large on the world of investments and, therefore, would need to be given particular importance when looking at the year ahead.
If you thought that this year’s US political theatre reached epic highs, 2020 will definitely give this year a run for its money. All roads lead to November, when Americans will head to the polls after one of the most scandalous and nerve-racking presidencies since Richard Nixon’s tenure in the 1970s. However, for those who detest the waiting, there will be plenty in store to remain entertained along the way.
The year will kick off with the Democratic primaries. The first primaries will be held in Iowa, New Hampshire, Nevada and South Carolina respectively, after which the stage will be set for the ‘Super Tuesday’ contest on March 3 in which 14 states vote at once.
The Democratic nomination has already had its epic start this year, with a historic field of candidates vying for the top job. As the field got narrower, electability and healthcare policy emerged as the two most important issues for this nomination.
Determining what a Democratic presidency would look like would probably be a job for next year’s crystal ball. Two of the front runners, Senator Elizabeth Warren and Senator Bernie Sanders, are ideologically left-leaning candidates. This suggests that their potentially successful challenge to the White House could imply radical changes to the US economy.
This would, in theory, reform the taxation system and loom heavy on the healthcare and insurance sectors. On the other hand, we must not forget the impeachment saga which is now set to continue to being probed further in Congress, following the explosive testimonies we have witnessed in these last few months.
The impeachment motion has passed the Congress floor comfortably, as a result of the Democratic majority obtained in the 2018 midterm elections. The process will now pass to the Senate where it is expected to be turned down as Republicans hold a majority in this chamber.
In the unlikely event that the motion passes through both Congress and the Senate, we could face the prospects of witnessing the first US President to be removed from office in US history. (If you are wondering, Nixon had resigned before he could be actually impeached after his involvement in the Watergate scandal). Such outcome would see Vice President Mike Pence hold office for the remainder of the legislation.
On the other side of the Atlantic, we will witness the abdication of Europe’s powerhead Angela Merkel, nicknamed by many of her compatriots as Mutti (Mother). She has held the reins of her country since November 2005, and some say those of the whole continent, during some of the most challenging times in European post-war history. Her departure will leave a large vacuum in leadership and direction both in her motherland and in the continent.
All roads lead to November, when Americans will head to the polls
The in-tray of her successor, Annagret Kramp-Karrenbauer, dubbed as the mini-Merkel, is full to the brim as she will have to deal with a number of pressing issues. These include the fragile coalition with her party’s Social Democratic partners, the multiculturalism issues which are fuelling the rise of the anti-immigration party the Alternative für Deutschland, the increasing income inequality and the crippling of the economy under the strain of decreased demand for German exports as a result of the ongoing trade war.
This will turn the headlights on the neighbouring European powerhouse, France, under the leadership of Emmanuel Macron. Despite being popular abroad, the French president is scorned by many of his compatriots at home. Big on reform, the French are experiencing what can be described as a positive run in terms of economic growth, always in the context of the fellow European member states.

Across the channel, the UK will once again try to deliver its Brexit deal, which has distressed the country throughout and reaped divisions across the isles.
This June will mark three years since the infamous June 3, 2016. Since that day, the country has been, and somewhat remains, in oblivion. Despite that, one may argue that matters could have turned out much worse for the British economy.
The clouds of uncertainty over the future of the isles have generated a situation of anticipation which has reached across from the largest multinationals to the commoners. This has translated into delaying of investments, scaling down and outright closures in some cases.
With the current outlook, all developments towards resolving the Brexit transition will be considered as improving the long-term outlook of the UK and will add confidence to investors and consumers alike. The recent Tory historical landslide, at the expense of Labour, has given markets an initial boost as the British government has now a clear hand in pursuing its Brexit strategy without needing to rely on minority parties.
One country not known for experiencing political unrest is definitely China. Through its one-party system, it has swept away any form of dissidence through the Communist tight grip over the country.
Despite that the Chinese economy continues to lose steam since its heydays of double-digit growth, it remains by far one of the fastest growing economies in the world, with further upside potential.
This year’s issues, with the uprisings in Hong Kong, are a thorn in the side for the leadership in Beijing. Despite the fact that Hong Kong no longer represents a disproportionate portion of the Chinese economic output, the one-country-two-systems model is being put to the test as it never has been before. The reason why this is a serious issue for China lies in the fact that the spread of dissidence can very easily threaten the Communist leadership if it were to spread to the mainland.
From one side, due to Hong Kong’s interconnectedness to the West, the quashing of protests would draw the ire of Western countries thus risking sanctions. On the other hand, accommodating protesters could signal weakness to the many suppressed dissidents in the mainland. Xi-Jinping finds himself having to tread this delicate balance in a bid to retain stability and prosperity for the people of his country.
Regardless of what occurs in relation to the Hong Kong issue, China remains an attractive investor proposition. Through the current trade negotiations, and as a long-term trend, we have witnessed increased openness of the Chinese financial markets, which represent a tremendous opportunity for asset allocators to access this market which was previously off limits.
The most attractive feature of this market is the growth of the Chinese consumer, which represents an opportunity for growth and higher returns compared to the comparatively weaker levels of growth in developed markets.
Despite the many potential downsides that could occur during the year, the forecasts for this year give us some respite. Two potential headwinds are the developments with regards to the North American free trade agreement USMCA and the China-US trade policy. Given the electoral pressures on the current US President Donald Trump, we can expect progress on these two fronts. The markets have been awaiting a resolution on these matters for quite some time and any positive outcome is likely to be met with further market upside.
Not having discussed in any particular detail the economic changes expected next year, it emerges clearly that it would be a fool’s errand to try to navigate this year’s markets without professional guidance. After the great recession, the past 10 years have been a relatively benign period for investors with a few bumps along the road.
However, if there is anything that the majority of analysts agree upon is that caution is required for the road ahead.
Whatever turn markets take, there will always be opportunities and tactical decisions to make, and by seeking professional advice for your portfolio, you will be able to make another step towards achieving your long-term goals.
Daniel Gauci is a financial adviser at Calamatta Cuschieri. For more information, visit, www.cc.com.mt. The information, views and opinions provided in this article are solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.