Laidlaw & Company debuts the Inaugural “Laidlaw Five” on Bloomberg Radio

Laidlaw & Company (UK), Ltd.

2020 Outlook – Five Forecasts

NEW YORK–(BUSINESS WIRE)–With 2019 drawing to a close, the Laidlaw Investment Policy Committee, with insights from David Garrity, CFA and Chief Market Strategist at Laidlaw and Company, is inaugurating the “Laidlaw Five” 2020 forecasts which offer investors thoughts on five particular areas to take into account when considering how best to navigate the capital markets in the year ahead and which will be periodically revised as the year unfolds and significant events necessitate.

Politics: Elections Prompt Markets To Pause (1)

With 2020 being a year of elections across the world culminating in the November 2020 U.S. general election, investors should consider that investment returns are likely to be muted until the electoral tea leaves are read. That said, Laidlaw expects positive investment returns will most likely be realized as a “relief rally” in the back half of 2020. Relative to the U.S. Presidential contest, while the expected candidates in the general election are Donald Trump (GOP) facing Michael Bloomberg (Democratic), it is important to note that there is high level of uncertainty as there are thoughts the Democratic Party at its July 2020 convention in Milwaukee, Wisconsin might have its first “brokered” convention in years. Meanwhile, impeachment, trade policy, technology sector regulation, health care reform, and Supreme Court vacancies are expected to result in a contentious campaign culminating in an election with high levels of voter turn-out. Interesting to note, 2020 will be the first U.S. election in which the “Baby Boomer” generation is no longer the majority of the electorate as “Millennials” move to the fore.

Macro-economy: Tariff Wars, “Brexit”, & Iran Are Wild Cards (2)

The global macro-economy is likely subdued as major events such as the U.S.-China trade tariff confrontation and the distinct possibility of a hard “Brexit” by the U.K. from the E.U. remain unresolved. Note that the inclination of the current U.S. Administration to withdraw from long-standing multilateral agreements in favor of more inefficient bilateral trade arrangements is likely to leave open the possibility of increased trade tensions with the E.U., something that may result in ECB monetary policy moving away from continued experimentation with negative interest rates. In terms of exogenous shock, Laidlaw believes an increase in oil prices to the $75/barrel level is possible depending on OPEC production cutbacks and the possibility of conflict with Iran limiting Persian Gulf shipments through the Strait of Hormuz. With this as back-drop, GDP growth is expected as follows: U.S. +1.5%, E.U. +1.0%, and World +2.5%.

Markets: Equities +7% Due To Buybacks & “TINA”, Interest Rates Edge Lower (3&4)

The fixed income markets in 2019 called the tune as the shift in E.U. interest rates towards negative prompted the U.S. Federal Reserve to cut interest rates three times thereby supporting equities during a period when earnings contracted and capital investment spending stagnated under the uncertainty associated with the U.S.-China trade tariff confrontation. For 2020, Laidlaw has a 3,400-level target for the S&P500, a +7% total return from current levels. Equities benefit from a return to corporate earnings growth supporting stock buy-back activity coupled with low interest rates leaving investors in the position of “there is no alternative” to equities. While no further Fed interest cuts are thought to be in the offing, the estimated -0.6% impact to U.S. GDP growth from Boeing halting 737 Max production may change that view. The U.S. Treasury 10-year rate now at 1.92% is expected to contract to 1.25-1.50% over the course of 2020 as the global macro-economy slows.

Sectors: Tech Sees Regulation Risk Limit Potential, Election May Benefit Healthcare Prospects (5)

While investors have built wealth since the 2009 Recession by taking an over-weight position in large-cap U.S. Tech, the increasing risk of greater regulation may serve to depress profit margins for names such as Alphabet and Facebook and in the process limit the sector’s appreciation potential. While the yield curve has steepened off the August 2019 lows, a development that has favored Financial sector shares, Laidlaw expects the macro-economy’s uncertainties to slow and eventually limit further curve steepening. Meanwhile, the possibility of “Amazonization” is rising in the Financial sector as Tech names are speculated to be considering potentially disruptive moves such Apple acquiring an asset manager. That said, Laidlaw views the Healthcare sector as offering an attractive combination of growth and valuation that has the potential to improve should the 2020 election better define its return potential.

About Laidlaw & Company (UK) Ltd.

Laidlaw & Co. is headquartered in New York City with additional offices in London, San Francisco, CA, Greenwich, CT, Boca Raton, FL, Toms River, NJ and Melville, NY. Laidlaw and Company (UK) Ltd. was founded in 1842 as one of the first Investment Banking firms on Wall Street and continues as a full-service investment bank, brokerage and Wealth Management firm offering personalized investment advice for high net worth individuals and skillful execution to private and public institutions. For further information contact Richard Calhoun rcalhoun@laidlawltd.com.

Other than disclosures relating to Laidlaw & Co., this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst’s judgment. Laidlaw & Co. conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Investment Research Division.

This research is focused on investment themes across markets, industries and sectors. It does not attempt to distinguish between the prospects or performance of, or provide analysis of, individual companies within any industry or sector we describe. Any trading recommendation in this research relating to an equity or credit security or securities within an industry or sector is reflective of the investment theme being discussed and is not a recommendation of any such security in isolation. This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur.

Contacts

Scott Abry

Abry Advisors, LLC

203-253-6018

scott@abryadvisorsllc.com