Economic Environment and Outlook


Basel, Q1-2020 (January 2020)


Growth in Switzerland should improve slightly in 2020. A better external demand will help the economy: German manufacturing is stabilising with a positive effect across Europe and Switzerland. Progress in the US-China trade dispute and Brexit clarity will strengthen this trend. The Swiss franc remains a concern, the central bank is trying to mitigate the effects of a strong currency. Another concern is the real estate sector and mortgage loans.


The US economy will probably continue to grow in the first quarter of 2020. Consumption remains positive, the labour market conditions remain strong, and the savings rate is still improving. House prices are stable and residential investment should remain buoyant. Short-term rates will stabilise in 2020, growth forecasts remain fairly optimistic. The corporate sector is competitive, earnings are expected to remain robust. A better European growth will help export-oriented companies. There are more positive than negative elements to this scenario but on the other hand the administration's ideas on various domestic issues and the Middle- and Far East have the potential to negatively impact growth and markets. In spite of some success in negotiations between the United States and China, the impact of the ongoing trade dispute should not be underestimated.


Industrial production is somewhat subdued. GDP growth rates will improve but some countries are still challenged by public debt financing. Germany may see a slightly better growth in 2020, as manufacturing is stabilising. Exports and services decline raise pressure on the government to add fiscal stimulus. The ECB is reassessing its monetary policy, the era of quantitative tightening has proved to be short lived. Interest rates will remain at very low levels - markets are expecting a more generous monetary policy. Manufacturing is weak, inflation remains low. In the UK, the Bank of England might need to contemplate a new monetary strategy for post-Brexit Britain, as negotiators remain engaged in a complex negotiation process that will stretch into 2020. Boris Johnson’s stunning victory in general election will shape the course of Brexit, the UK leaving the European Union is now very likely. But he faces the task of negotiating new trade terms with the EU and avert a schism in the United Kingdom.


The government in Japan is pushing for more growth and the central bank, with its negative interest rate policy, has pledged to expand asset purchases, buying bonds and treasury bills. The public debt is already very high. The economy is stalling, private consumption and public investment weaker. A more competitive yen eases corporate pessimism. In China, exports are less vigorous than expected. The economy and domestic demand remain stable. In India, the new government continues to implement policy changes designed to improve growth.


CHFStable, due to its role as a safe haven currency. The SNB will continue to sell Swiss francs to avoid a further appreciation.
JPYTo remain stable, likely to soften again if there is more central bank intervention.
GoldConsolidation in spite of continuing economic and geo-political uncertainties.

Financial Markets

Interest Rateslowlowlowlowlow
Stock Marketsvolatilevolatilevolatilevolatilevolatile


The aforementioned Economic Environment and Outlook shall not constitute a recommendation or an investment advice. It is not the result of any financial analysis and the “Directives on the Independence of Financial Research” issued by Swiss Bankers Association does therefore not apply.