Watson’s Yearly 2019/2020 FULL VERSION

This is my annual review of the year just gone and preview of the New Year. It is intended to give you a global overview of what I think are the most important economic events and themes that occurred in 2019 and the ones to look out for in 2020. I hope you find this both informative and useful!

*** CONTENTS ***

(If you want to skip to a particular section, please click on the appropriate heading below)

Section 1: Introduction

Section 2: The Review of 2019

Section 3: Preview of 2020

Section 4: Country-by-country overview for 2020

Section 5: Themes for 2020

Section 6: Conclusions

I thought I’d kick off proceedings for the 2019/2020 edition of Watson’s Yearly with a few quotes, as I did in last year’s edition. Who said the following during the course of 2019 (answers below)?

“We have seen in previous World Cups that teams sometimes play their final in semi-finals and don’t always turn up for a final”

“We will focus relentlessly on building a fairer and more prosperous country for everyone who lives here”

“A lot of people laugh at it being a silly hobby but it’s a wonderful hobby”

“No human is limited”

“She seems like a very happy young girl looking forward to a bright and wonderful future”

2019 has been another eventful year whose momentum has continued right to the end with a Trump impeachment and the biggest Conservative majority since 1987!

Happy reading!

Peter Watson

(Quotation answers: 1. Ex-Wales coach Warren Gatland on England’s chances in the Rugby World Cup Final in Japan, 2. Nicola Sturgeon, Leader of the SNP, after a huge surge of support in the UK election, 3. Sir Rod Stewart on the completion of his impressive scale model railway (don’t call it a train set, he’ll get angry 😂), 4. Eliud Kipchoge, after running the first ever sub-two hour marathon in Vienna, 5. President Trump on Greta Thunberg)

January 2019 – Macro: The US Federal Reserve ended 2018 with four interest rate hikes and a hint that there might be more to come. Six weeks later, it scrapped that, put interest rates on hold and said that the next direction could well be down, signalling a major change in the Fed’s assessment of the US economy. In cars, Figures released by the China Passenger Car Association (CPCA) showed that car sales in China actually fell for the first time in twenty years and India replaced Germany as the world’s fourth largest automotive market according to data from LMC Automotive and McKinsey – with the possibility of it growing larger than the current #3 (Japan) within three years! Fitch estimates that car density – a measure of how many passenger cars there are per 1,000 people – was just 27 in 2018 versus 145 in China and 570 in Germany. In retail, Patisserie Valerie went bust, in tech, Dyson announced that it was moving its HQ to Singapore and in finance, Metro announced that it had mis-classified its property assets which resulted in a massive sell-off of the shares (this problem continued to snowball over the rest of the year and proved to be Metro-centric and NOT one that affected others in the sector)

February 2019 – Macro: Italy fell into recession (defined as showing falling GDP growth for two consecutive quarters) as the economy shrank by 0.2%, Germany only just avoiding recession by posting zero growth after the previous quarter contracted by 0.2%. In tech, Tesla announced the purchase of Californian battery technology company Maxwell Technologies, bolstering its current capabilities, then there was a historical moment when DJ Marshmello held a 10-minute virtual gig at Pleasant Park within Fortnite where developers switched off guns so players within the game could “watch” the concert. There were reports that over 10m players were online at the time, potentially making it the most attended concert ever! Samsung unveiled a bendy phone called the Galaxy Fold. In cars, Honda announced plans to shut its Swindon plant when the current production run finishes in 2021, putting 3,500 of Honda jobs at risk

March 2019 – Macro/trade: Trump/Kim talks in Vietnam ended early due to no agreement being reached over the sanctions – Kim wanted them lifted completely and Trump said no. Theresa May wobbled on Brexit, then her revised deal was rejected, the prospect of a no-deal and/or a second referendum was taken off the table and Parliament voted for a Brexit delay. China cut its GDP growth forecasts down to a range of 6-6.5% – its slowest annual GDP growth rate for almost thirty years and Turkey fell into recession. In tech, Huawei announced a new bendy phone called the Mate X and Google’s YouTube Music launched in India just weeks after Spotify, with a lower subscription price, to compete with local giants Gaana (which is backed by China’s Tencent) and JioSaavn in addition to Amazon Music and Apple Music. On the high street, M&S confirmed it was in talks with Ocado, Ocado managed to sign up Australian supermarket group Coles to use its technology, Gap announced that it would separate the fast-growing budget business of Old Navy from the rest of the business to create two separately quoted companies (this was because Old Navy has continued to outperform sister brands Gap and Banana Republic for a number of years to the point that it now accounted for over half of the group’s sales), Ted Baker’s founder, Ray Kelvin, resigned amidst allegations of inappropriate behaviour towards staff and John Lewis cut the staff bonus pool to its lowest level in 65 years. JD Sports decided to buy Footasylum for £90m, Boparan Restaurant Group announced the closure of a number of Giraffe and Ed’s Easy Diner outlets as part of a CVA and Office Outlet (which used to be “Staples”) fell into administration. In cars, Tesla made a swift U-turn only days after announcing that it was going to close down virtually all of its sales outlets and go online in order to keep costs down and then unveiled the Model Y compact SUV, Ford announced its withdrawal from the car market in Russia after years of losses that will involve the closure of two Russian factories but it still plans to make and sell commercial vehicles in the country. In finance, Fidelity National Information Services’ (aka FIS) bought Worldpay, the UK’s leading payments processor, for $43bn in the latest round of consolidation between payment processors, coming hot on the heels of US payments processor Fiserv’s acquisition of rival First Data for $39bn in January while Commerzbank and Deutsche Bank confirmed that they were in talks to merge. In IPO developments, Levi Strauss had a successful flotation on the NYSE and Lyft had a strong debut on the NASDAQ.

April 2019 – In oil, State-owned oil company Saudi Aramco attracted massive demand for its $12bn international bond sale – the strongest demand ever seen for an emerging market company (it attracted $100bn-worth of demand). On the UK high street, The maximum stake of Fixed Odds Betting Terminals was reduced from £100 to £2 from April 1st, heralding the closure of thousands of betting shop branches, Impossible Foods signed a distribution deal with Burger King for its “Impossible Burger 2.0”, Superdry co-founder, Julian Dunkerton, returned to Superdry and ousted the existing board,  rumours of a takeover of Thomas Cook by Fosun International got investors excited (but we all know how that all worked out in September!) and the Sainsbury’s/Asda merger was blocked by the Competition and Markets Authority. In tech, Samsung was forced to postpone the launch of its $2,000 bendy wonder-phone following reports from reviewers that the phones were breaking. In cars, a team from Tesla was sent to investigate a video shared on Chinese Twitter-like Weibo which showed a parked Tesla Model S exploding. In finance, Deutsche Bank and Commerzbank merger talks collapse, Japan’s Nomura announced its first full-year loss in ten years and that it would cut $1bn in costs and shut 20% of branches (domestic branch closures were particularly shocking as these have been a sacred cow for Nomura over the years)

May 2019 – Macro: Theresa May announced her resignation, In meat-alternatives, Beyond Meat had a hugely successful debut on the Nasdaq as its shares stormed up by a whopping 150%, Impossible Foods raised $300m in its latest financing round, which effectively increased its implied valuation by two-thirds to $2bn. Uber shares listed at the bottom end of its price range,  In retail/UK high street, Debenhams got overwhelming approval from its creditors to go ahead with its CVA despite strenuous objections from Sports Direct (whose 29% stake was wiped out), Ikea opened a store in central Paris (a departure from its usual out-of-town format), Amazon and Next signed a deal enabling customers to collect their Amazon deliveries from Next shops, Arcadia Group announced the closure of Miss Selfridge’s Oxford Street flagship store as part of a major restructure, Jamie Oliver’s restaurants fell into administration and Pret A Manger bought rival Eat. In cars, Tesla tried to address its spontaneously-combusting car problem (see April) via a software update and Fiat Chrysler announced it was seeking a merger with Renault and got the go ahead initially (but this fizzled out in June). In tech, Facebook announced Project Libra, Google announced it would block Android access to Huawei and EE rolled out 5G in the UK. In finance, Global Payments bought TSYS in a $21.5bn all-stock deal not long after Fiserv’s $39bn deal to buy First Data (January) and the Fidelity National Information Service (FIS) agreement to buy Worldpay for $43bn earlier this year (March).

June 2019 – Macro: Australia cut interest rates to a record low of 1.25% in a bid to stop the economy falling into its first potential recession in 28 years. In M&A, United Technologies announced a deal to merge with Raytheon to form a combined aerospace and defence company – to be called Raytheon Technologies – worth over $100bn, making it the world’s #2 defence contractor by revenue, Carrefour announced that it was pulling out of China, selling an 80% stake in its business there to Chinese retailer Suning.com. In finance, Neil Woodford’s investment firm announced that it was blocking redemptions from its £3.7bn flagship fund. Basically, he put too much money into investments that were hard to sell (aka “illiquid”) and everyone was asking for the money back quicker than he could sell assets to cover the demand. This made investors panic in increasing numbers in what turned out to be a fatal death spiral. In cars, the Chinese government cut the subsidy for electric vehicles by about 65%, Fiat withdrew from the proposed merger with Renault and Ford announced that it would axe 12,000 from its European workforce as part of its cost-cutting measures. Elsewhere, Beyond Meat unveiled its first set of results since its flotation last month and its quarterly sales more than tripled, Slack made a successful stock market debut on the New York Stock Exchange via the unusual route of a direct listing and shot up by 60% on its first day of trading andBathstore went into administration.

July 2019 – Macro: Australia decided to cut its interest rate again for the second time in two months to head off any economic slowdown to the 1% level. Argentinian presidential primary elections spelled the beginning of the end for (now-former) president Mauricio Macri who lost to leftist candidate Alberto Fernández. In retail, William Hill announced 700 store closures and Homebase (which is itself owned by Hilco, the turnaround specialists) bought Bathstore with a view to put Bathstore concessions in its outlets. There were some big job cuts as Deutsche Bank announced plans to cut 18,000 jobs and siphon off €74bn of its riskiest assets into a “bad bank” and Nissan announced that it would cut 9% of its global workforce. Elsewhere, Nintendo announced the introduction of the Switch Lite and Netflix lost subscribers for the first time in almost ten years.

August 2019 – Macro: Japan-South Korea relations continue to worsen as South Korea scrapped their intelligence-sharing pact with Japan (called the General Security of Military Information Agreement), Giuseppe Conte resigned as Italy’s prime minister, Ukraine got its youngest ever prime minister and Indonesia’s President Widodo announced plans to move the capital away from Jakarta due to it being one of the fastest sinking cities in the world. In M&A, Hong Kong Exchanges and Clearing (HKEX) ruffled feathers by attempting to bid £32bn for the London Stock Exchange, getting in the way of a “friendly” purchase by LSE of Refinitiv, the data and trading group. Just Eat announced intentions for a £9bn merger with Takeaway.com, Bayer sold its animal-health unit to Elanco for $7.6billion, the UK’s #1 pub and restaurant operator Greene King was bought by Chinese conglomerate CK Hutchinson for £5bn, US toymaker Hasbro bought Canadian company Entertainment One for $4bn and Philip Morris International and Altria announced talks to merge (phew! What a list!). In retail, Sports Direct bought preppy apparel retailer Jack Wills for $12.7m but Grant Thornton resigned as the company’s auditor after some shocking results and an “unexpected” Belgian tax bill, Walgreens decided to close 200 stores in the US, CostCo was greeted by frenzied scenes at the opening of its first China store and upmarket US department store Barneys filed for bankruptcy while online retailer Boohoo.com bought Karen Millen and Coast’s online business for £18.2m. In fast food, KFC announced that it was working with Beyond Meat in the US to launch “Beyond Fried Chicken” nuggets. In cars, Alphabet’s driverless division Waymo announced that it won’t be making cars from scratch that it would be sharing its proprietary self-driving data set to all in a bid to accelerate the development of driverless technology.

September 2019 – Macro: Outgoing ECB president Mario Draghi announced stimulus measures, Hong Kong chief executive Carrie Lam announced a withdrawal of the extradition bill that sparked of months of protests, California passed some landmark legislation (called the California Assembly Bill-5, aka “AB-5”) that will force companies to reclassify some of its contract workers as employees  In oil, oil prices shot up by 20% on fears of prolonged supply disruption for the world’s biggest exporter of crude oil after missile and drone attacks by Iran put more than half of Saudi Arabia’s oil production out of action . The fears proved to be overblown as Saudi Arabia just tapped into its oil reserves to make up for the loss and got production back on track faster than everyone was predicting. Khalid al-Falih was removed as Saudi Arabia’s energy minister (and chairman of Saudi Aramco) to be replaced by Prince Abdulhaziz. In vaping, US health authorities started to advise people to stop using e-cigs and other vaping products while they conduct investigations, India decided to ban e-cigarettes entirely and China mysteriously stopped the sale of Juul’s products while the proposed merger between Philip Morris International and Altria was called off. WeWork had a tough time as it announced at the end of the month that it wouldn’t be floating on the stock market after all as investors continued to express concerns over its governance and leadership and founder/chief exec Adam Neumann was fired. In retail, M&S fell out of the FTSE100 for the first time in 35 years and Aldi announced plans to double its store numbers in London while, down the high street, Thomas Cook collapsed, leaving 150,000 holiday makers stranded and 21,000 employees out of a job. In tech, Facebook launched its dating app in the US and unveiled Portal TV as part of plans to expand its hardware product range while Samsung’s Galaxy Fold got relaunched in South Korea . In cars, VW announced its first ground-up electric car while Jaguar Land Rover announced the arrival of the new Defender. Elsewhere, the US Federal Trade Commission (FTC) is suing Match.com (which owns sites like Tinder, OKCupid and PlentyOfFish as well as Match.com) saying that the online dating company ensnared “hundreds of thousands” of people to pay for its services by using false expressions of interest. Match has over 25% of the online dating market

October 2019 – Macro: Mario Draghi handed over the reins to Christine Lagarde as head of the ECB and Justin Trudeau won another term as Canadian PM but with a smaller majority and a fragmented remit. In M&A, the world’s largest online betting firm was created by Flutter Entertainment (formerly known as Paddy Power Betfair) which paid £10bn in an all-paper takeover of The Stars Group (aka TSG, which owns Sky Bet), Sophos, the UK cybersecurity software specialist, was bought by private equity fund Thoma Bravo for $3.8bn and WH Smith bought Marshall Retail Group in the US for $400m, effectively doubling the size of WHSmith’s international travel business. Just Eat’s takeover by Takeaway.com was rudely interrupted by South African internet firm Prosus weighing in with an unsolicited alternative all-cash offer. In finance, digital bank Revolut made a dramatic announcement that it has signed a deal with card issuer Visa that will help it to expand to 24 new countries, Metro Bank’s controversial chairman Vernon Hill resigned and Facebook’s Libra lost the backing of Booking.com, PayPal, Mastercard, Visa, e-Bay, Stripe and Mercado Pago with the Dutch firm PayU the only payment firm remaining! In retail, Barneys New York has finalised a deal to sell its name and brands to Authentic Brands Group and investment firm B.Riley Financial and close all of its stores, Tesco chief Dave Lewis announced plans to step down next year, Links of London went bust, Hays Travel bought Thomas Cook’s shops. Some dramatic announcements were made as Dyson decided to end its attempts to make its own electric car from scratch and Canopy Growth’s pharmaceutical division, Spectrum Therapeutics, was granted a licence from the Home Office to import medical cannabis in bulk to the UK

November 2019 – Macro: Mario Draghi ended his term as the president of the European Central Bank, handing over the reins to former IMF director, Christine Lagarde. Spain has its fourth general election in four years but it proved to be a disappointment as PM Pedro Sanchez was left with an even smaller majority for his PSOE Socialists party – although he actually managed to negotiate a coalition government with far left party Podemos soon after. Bolivia’s Evo Morales “resigned” after being in the top job since 2006,  pro-democracy candidates had a landslide win in the Hong Kong district elections but the territory fell into recession and China decided to lift the ban on Canadian pig and beef imports.  There was a ton of M&A, as Alphabet made an offer buy Fitbit for $2.1bn, PayPal bought discount coupon hunter Honey Science for $4bn and Charles Schwab agreed to pay $26bn for rival TD Ameritrade, Kylie Jenner managed to sell a 51% stake in her four-year old cosmetics company to Coty, LVMH bought Tiffany for $16.6bn and eBay sold its online ticketing business StubHub for $4.1bn to Viagogo (subject to approvals). Fiat Chrysler and PSA Group boards announced an intention to merge, Novartis bought biotech company The Medicinces Company for $9.7bn, a Mitsubishi-led consortium bought Dutch Utility company Eneco for €4.1bn and EasyJet decided to buy some Thomas Cook assets as part of plans to start its own package holiday business . In retail, Alibaba had another record-breaking Singles’ Day event and Mothercare ceased all UK trading while online electrical goods retailer AO.com decided to pull the plug on its business in the Netherlands. In tech, Facebook announced a new service called Facebook Pay that will let you pay companies and individuals via WhatsApp, Instagram, Messenger and Facebook itself, Apple announced a new app with a really exciting name – “Research App”, where users will allow the company access to information collected by their Watches and iPhones and use it to create new products based on “live time” data while Google launched its game-streaming service Stadia. In car-related news, Tesla announced it would be building a new “Gigafactory” in Berlin and Uber lost its London licence. Elsewhere, the French government managed to raise a useful €2bn in cash in the Francaise des Jeux IPO and RBS announced the official launch of its new digital bank, Bó

December 2019 – Macro/trade: Boris Johnson won the UK general election by a majority, Trump signaled that the NAFTA-replacing USMCA was heading in the right direction and announced a partial trade agreement with China but on the downside (for him, anyway!) Trump was impeached for abuse of power and obstruction of Congress regarding allegations of him forcing the Ukraine to investigate former Vice President Joe Biden and his son in return for military aid. In M&A, Fiat Chrysler and Peugeot agreed to merge to form the world’s fourth biggest carmaker and International Flavors & Fragrances offered $26bn for DuPont’s nutrition and biosciences business with a view to targeting the fast-growing meatless market. In tech, Alphabet/Google co-founders Larry Page and Sergey Brin stepped down from Alphabet leaving Google Sundar Pichai in charge of the whole lot, Huawei has released a new phone, called the Mate 30, that has no US-sourced parts and Apple, Amazon and Google agreed to collaborate with each other and members of the Zigbee Alliance (comprising of members including Samsung, Ikea and Comcast) to build a common standard so that devices could be operated by any voice assistant. In retail, Ted Baker’s new CFO found a £25m hole in the accounts which led to resignations from both the CEO and Chairman and the weaker share price got vultures circling as hedge fund Toscafund hoovered up the company’s shares becoming its second biggest shareholder after founder Ray Kelvin, In finance, JP Morgan got approval to take majority-control of its Chinese securities business, an important strategic win for the US bank in its aim to expand its reach in China while M&G took the decision to close trading in its property fund as it couldn’t sell assets fast enough to keep up with rising demands from investors to withdraw their money. There was more bad news for vaping as the UK’s Advertising Standards Authority (ASA) ruled that British American Tobacco (BAT), Ama Vape Lab, Attitude Vapes and Mylo Vapes should not be allowed to promote their products on Instagram.

Regular readers of Watson’s Daily will know that I often finish an edition with an amusing/interesting story to end on a lighter note, so here are some of my favourites of 2019! In the “fun activities” category, I think that Beijingers vent their stress in ‘anger room’ (Reuters, https://tinyurl.com/y74swo5t) would be quite therapeutic, Slip slidin’ away: record-breaking Malaysian water chute unveiled (msn.com, https://tinyurl.com/y4o59yqw) looks like a decent energy rush and HacoKara Karaoke Box: The best way to de-stress at the cinema in Japan (SoraNews24, Oona McGee https://tinyurl.com/wlj7k9a) would be my guilty pleasure if these things ever made it over to the UK. In the “weird inventions” category, Bizarre device claims to dry your dog in minutes – here’s where you can buy it (The Mirror, Courtney Pochin https://tinyurl.com/ya4b7b5h) actually looks quite useful – if somewhat bizarre – ‘Tinder for cows’ matches livestock in the mood for love (Reuters, Matthew Stock https://tinyurl.com/yxgaetdf) is definitely rather specialist and although The amazing hat that keeps you from missing your Subway stop (103.5KTU, Wendy Wild https://tinyurl.com/y67ygpn3) is a great idea, I fear that it could open the wearer up to abuse 😂. In the “fitness/sports/challenges” category, This gymnastics spinning class will have you defying gravity and burning 600-700 calories an hour (Inside Edition, Stephanie Officer https://tinyurl.com/y2a8rlpk) is just plain ridiculous, These Russian men slap each other silly for sport (Inside Edition, Stephanie Officer https://tinyurl.com/y4g7pdvh) just sounds unnecessarily painful but Blood, sweat but no tears: Japan’s office chair racing (Reuters, https://tinyurl.com/y4eqjawx) sounds like a lot of fun! Mariah Carey hilariously masters the bottle cap challenge using just her voice (Yahoo! Rachel DeSantis https://tinyurl.com/y48njgjw) was superb, but I particularly liked the video of a man vs dog noodle eating challenge here. In the “offbeat art” category, Japanese artist crafts beautiful Disney princesses, anime stars, and mythical beasts from sashimi (SoraNews24, Casey Baseel https://tinyurl.com/y292vxbq) is unexpectedly beautiful, Makeup artist transforms herself into amazing likenesses of famous oil paintings, celebrities (SoraNews24, Shannon McNaught https://tinyurl.com/y2rtjace) is just breathtaking but Japanese artist turns man’s face into eerily realistic human flesh coin purse (SoraNews24, https://tinyurl.com/y3ubbq6z) just gives me the creeps! Roll on more stories for 2020!

January 2020 – Central Banks: interest rate meetings (provisional) for the US 28-29th, Europe 23rd, UK 30th. The World Economic Forum takes place at Davos, Switzerland, 21st – 24th. This is where world leaders, corporate titans and celebs talk about world issues whilst drinking loads and skiing. Tech: Consumer Electronics Show (CES, 7th – 10th). This is a massive annual tech event where companies go to show off their new gadgetry. These days, car companies also go there to show off their wares and this year is notable because Apple is going to be there – normally it doesn’t bother and unveils its shiny new stuff at its own WWDC. Try not to get too excited – not every product here is a blockbuster! [UPDATE, Jan 19th: I often think that most of CES is noise and gadgetry for the sake of it BUT if you want to see an entertaining selection, have a look at THIS from Endgadget] Elections: Taiwan general election on 11th January with China-sceptic Tsai Ing-wen currently edging it over Beijing-friendly candidate Han Kuo-Yu. [UPDATE, Jan 12th: Tsai Ing-wen won the election by a mile. She put sovereignty and democracy at the centre of her election campaign and is therefore expected to be a thorn in China president Xi’s side. Xi has been increasing efforts to end Taiwan’s de facto independence, so this will be a set-back. Taiwanese voters saw what happened with Hong Kong and clearly don’t want the same to happen to them]  Legislation: the California version of Europe’s GDPR, called the California Consumer Privacy Act (CCPA), will come into force

Sports: Tennis – the Australian Open (20th January – 2nd February)

February 2020 – Thailand’s telecom regulator is due to hold a 5G spectrum auction this month, with winning bids announced in March. Singapore and Vietnam are also planning to launch 5G this year. Really exciting conferences: the World Banknote Summit 🥱 (24th – 26th) where exciting people from around the globe will be discussing the future of cash. Wild. Mobile World Congress, Barcelona (24th – 27th) – the largest mobile telephony event in the world [UPDATE, February 13th: the Mobile World Congress in Barcelona has been cancelled due to the coronavirus]

Sports: rugby – Six Nations (1st February – 14th March, UPDATE, March 9th: Six Nations games postponed due to coronavirus), American Football – Superbowl (2nd February), NASCAR – Daytona 500 (16th February), boxing – Tyson Fury vs Deontay Wilder for the WBC heavyweight title in Las Vegas (22 February), horse racing – the Saudi Cup in Riyadh (29th February) where the winner gets $10m and the rest of the $10m purse gets divided up amongst the others…

March 2020 – Central Banks: interest rate meetings (provisional) for the US 17-18th, Europe 12th, UK 26th (UPDATE, March 16th: interest rate meetings have been all over the place as emergency cuts have been made due to the coronavirus). Annual meeting of China’s National People’s Congress where the country’s top two political bodies will lay out their projections for the economy [UPDATE, 24th February: this event has been postponed, for the first time in decades, due to the coronavirus outbreak]. Elections: the US presidential race gets going and various states get to choose a nominee. US elections are rather long and drawn out affairs! Motor shows: Geneva (3rd – 15th, UPDATE, 24TH February: cancelled due to coronavirus outbreak)

Sports: F1 Australia Grand Prix (15th March, UPDATE, March 13: postponed/cancelled due to the coronavirus), F1 Bahrain (22nd March, UPDATE, March 13th: postponed), Oxford vs Cambridge boat race (29th March UPDATE, March 16th: cancelled due to the coronavirus )

April 2020 – Central Banks: interest rate meetings (provisional) for the US 28th-29th, Europe 30th. Summits: China president Xi Jinping is due to make his first state visit to Japan this month [UPDATE, March 2nd: Xi Jinping postpones this state visit to Japan due to the coronavirus outbreak]. The first of two ASEAN summits will be held in Vietnam [UPDATE, March 20th: postponed until end of June due to the coronavirus]. Motor shows: Beijing (21st – 30th, UPDATE, February 17th: postponed due to coronavirus) Other: Lenin’s 150th birthday and the 50th anniversary of the break-up of the Beatles

Sports: Horse racing – the Grand National (4th April. UPDATE, March 16th: cancelled because of the coronavirus), F1 Vietnam Grand Prix [UPDATE, March 13th: called off], Golf – Masters at Augusta (9th-12th April, UPDATE, March 13th: Postponed due to coronavirus. UPDATE, April 6th: targeting November 9th-15th), Snooker – World Championship (18th April – 4th May UPDATE, July 7th: postponed to 31st July), F1 Chinese Grand Prix [UPDATE, February 12th: postponed due to coronavirus]. Movies: 007 film, No Time To Die (April 10th, UPDATE: March 4th: postponed until November 12th 2020).

May 2020 – Central Banks: interest rate meetings (provisional) for the UK 7th. Elections: UK local elections (7th May, UPDATE: 13th March 2020: Local, mayoral and Police and Crime Commissioner elections will be postponed until May 2021) will give everyone an idea of what they think of BoJo’s term so far.

Sports: F1 Dutch Grand Prix (May 3rd, UPDATE, March 15th: postponed due to the coronavirus), F1 Spanish Grand Prix (May 10th UPDATE, March 19th: Postponed due to the coronavirus), Football – FA Cup Final (May 23rd, UPDATE, April 18th: all games postponed due to coronavirus, UPDATE, June: FA Cup final to take place on 1st August at Wembley), Champions League Final (May 30th UPDATE, March 17th: postponed due to coronavirus. UPDATE, 17th June: final to be held on 23rd August at Benfica’s ground), F1 Monaco Grand Prix (May 24th, UPDATE, March 16th: cancelled), Tennis – French Open (24th May – 7th June UPDATE, March 17th: postponed to 20 September and 4 October due to the coronavirus), Horse racing – the Kentucky Derby (2nd May UPDATE, March 17th: postponed until September due to the coronavirus), Golf – US PGA Championship (14th – 17th May UPDATE, March 17th: postponed due to the coronavirus. UPDATE, June 22nd: the event will take place, without spectators, on August 3rd-9th). Movies: Fast & Furious 9 (May 22nd, UPDATE, March 12th: postponed for one year!).

June 2020 – Central Banks: interest rate meetings (provisional) for the US 9th-10th, Europe 4th, UK 18th. Summits: G7 summit at Camp David (UPDATE, March 20th: cancelled, but will be a teleconference call instead. UPDATE, May 31st: Trump has decided to postpone the G7 meeting until September and added that he thought Russia, South Korea, Australia and India should be invited in addition to the G7). Tech: Apple’s World Wide Developers’ Conference (WWDC, either first or second week, UPDATE, March 14th: to be held online due to the coronavirus) Motor shows: Detroit (9th – 20th UPDATE, March 30th: cancelled due to the coronavirus)

Sports: F1 Azerbaijan Grand Prix (7th June, UPDATE, March 23rd: postponed due to the coronavirus, UPDATE 12th June: cancelled), Canadian Grand Prix (14th June, UPDATE 7th April: postponed due to the coronavirus), French Grand Prix (28th June UPDATE, 27th April: cancelled due to the coronavirus), Football – Euro 2020 (12th June – 12th July UPDATE, March 17th: postponed to 2021 due to the coronavirus), Cycling – Tour De France (27th June – 19th July, UPDATE, 15th April: postponed until 29th August due to the coronavirus), Tennis – Wimbledon (29th June – 12th July UPDATE, April 1st: Wimbledon cancelled due to the coronavirus), Golf – US Open (18th – 21st June, UPDATE, April 6th: postponed until 17th – 20th September due to the coronavirus). Movies: Top Gun 2: Maverick (June 26th UPDATE, April 2nd: postponed until 23rd December)

July 2020 – Central Banks: interest rate meetings (provisional) for the US 28th-29th, Europe 16th. Elections-related: the candidate to face Donald Trump will be chosen at the Democratic National Convention [UPDATE, April 3rd: postponed until the week of August 17th] Other: Farnborough International Airshow (20th – 24th, UPDATE, March 20th: cancelled due to the coronavirus. The next one will be in 2022), which is where Joe Public goes to watch lots of amazing aerobatics etc., where airlines get the chequebook out to buy some planes and airforces go to buy fighters etc. It only takes place every two years.

Sports: Tokyo hosts the summer Olympics (July 24th to August 9th, UPDATE, March 24th: postponed to 2021 due to the coronavirus), F1 Austrian Grand Prix (5th July), British Grand Prix (19th July, UPDATE, June 2nd: postponed until 2nd August), Golf – The Open Championship (16th – 19th July UPDATE, April 1st: cancelled due to the coronavirus). Movies: Minions: The Rise of Gru (July 3rd, UPDATE, March 19th: postponed due to the coronavirus), Ghostbusters: Afterlife (July 10th, UPDATE, March 31st: postponed to March 5th 2021 due to the coronavirus)

August 2020 – Central Banks: interest rate meetings (provisional) for the UK on 6th. Elections-related: Delegates at the Republican National Convention confirm their presidential candidate and approve the manifesto (UPDATE: taking place Monday 24th-Thursday 27th August) Other: 75th anniversary of the nuclear strikes on Hiroshima and Nagasaki

Sports: The summer Paralympics will be held in Tokyo (August 25th to September 6th, UPDATE, March 24th: postponed to 2021 because of the coronavirus), F1 Hungarian Grand Prix (2nd August UPDATE, May 1st: IF this goes ahead, it will be behind closed doors. UPDATE: will take place on 19th July), Belgian Grand Prix (30th August), Golf – US Open (30th August postponed until September 17th-20th). Movies: Bill & Ted Face the Music (August 21st)

September 2020 – Central Banks: interest rate meetings (provisional) for the US 15th-16th, Europe 10th, UK 17th. Motor Shows: Paris (29th – 11th October UPDATE: postponed until 1st-11th October)

Sports: Tennis – US Open (31st August – 13th September), F1 Italian Grand Prix (6th September), Singapore Grand Prix (20th September, UPDATE 12th June: cancelled), Russian Grand Prix (27th September), Golf – Ryder Cup (22nd – 27th September, UPDATE, July 8th: postponed until September 21st-26th 2021)

October 2020 – Central Banks: interest rate meetings (provisional) for Europe on 29th. The second ASEAN summit of the year is to be held in Vietnam (UPDATE: postponed until 11th November). Other: 50th anniversary of the death of Jimi Hendrix

Sports: F1 Japanese Grand Prix (11th October – UPDATE 12th June: cancelled), US Grand Prix (25th October)

November 2020 – Central Banks: interest rate meetings (provisional) for the US 4th-5th, UK 5th. Elections: US presidential election (3rd November) Summits: G20 plus the IMF and World Bank in Saudi Arabia (21st-22nd)

Sports: F1 Mexican Grand Prix (1st November), Brazilian Grand Prix (15th November), Abu Dhabi Grand Prix (29th November). Movies: Godzilla vs Kong (November 20th UPDATE: delayed until May 21st 2021)

December 2020 – Central Banks: interest rate meetings (provisional) for the US 15th-16th, Europe 10th, UK 17th. Other: Beethoven’s 250th birthday

Movies: Coming To America 2 (December 18th)

Here is a country-by-country guide to some of the key events to look out for over the coming year. This is designed to give you an overview of what to expect in some of the world’s major economies during the course of 2020. Clearly, I can’t put every country in this (it would take me too long – I am only one guy, after all!) so I decided to cover the G20 countries plus a few others for the purposes of this report. I have included what I said this time last year with additional “hindsight” comments in red.

Stats are from a mixture of publicly available sources and are intended to give you a good general picture: 2020 GDP forecasts are from The World In 2020, population figures are from The World Factbook from the CIA, interest rate meeting dates are taken from the websites of the Bank of England, the FOMC and the ECB websites and all other stats are from www.tradingeconomics.com. They are correct to the best of my knowledge at the time of publication. Opinions are my own.

NB: Updated comments are made in LIGHT BLUE. Everything else was correct in January 2020.

THE AMERICAS

• United States of America – Population: 329m, Unemployment: 3.5% (3.7%), Interest Rate: 0-0.25% (March) 1-1.25% (March) 1.75%(2.5%), 2019 actual GDP growth: 2.1% (versus expectations of 2.2%), 2020 forecast GDP growth: 1.6%, Leader: Donald Trump (President). Overall: So Trump has been impeached, but he remains in office and has made some real progress right at the end of the year regarding trade agreements with his neighbours (in the United States-Mexico-Canada Agreement – USMCA) and China (he’s signed a “first phase” deal with China and is making bullish noises about a broader agreement in the pipeline) . Presumably, his political opponents are dragging things out for as long as they can to cause as much damage as they can to his presidential re-election campaign so it’ll be in his interest to keep the trade negotiation momentum going. With a trade agreement “sort of” in the bag with China, Trump will be turning his focus on negotiating agreements with Europe, which could be painful (for Europe). Whether this will benefit the UK or not, it’s too early to tell. Will Trump get re-elected? Given the way he has managed to fend off most political attacks during his tenure so far and the fact that there doesn’t seem to be a particularly credible opponent emerging just yet, I’d say his chances of re-election are pretty good. Having said that, if Michelle Obama decides to run for president, things could get interesting (and probably quite nasty)!
• [UPDATE, January 19th: the “first phase” deal he signed on the 16th will leave $360bn-worth of tariffs in place on Chinese goods, with the threat of more to come if China reneagues in any way, BUT it includes a commitment from China to buy about $200bn-worth of American goods and services. It also cancels planned US taxes on China-made mobile phones, laptops and toys and halves the current 15% tariff for about $120bn-worth of some other Chinese electrical goods. UPDATE, February 6th: “Teflon Trump” has won again as the Senate acquitted him over allegations that he pressured Ukraine into digging up dirt on a political opponent, effectively ending the process that has dragged on for the last few months. The two charges were on his abuse of power and the obstruction of Congress. Fun fact: Trump has become the first ever president to run for re-election having been impeached. UPDATE, March 27th: Trump signs a $2.2tn bailout package for individuals and companies. Markets rallied strongly in anticipation but then calmed as investor attention is now on how quickly this can be executed. UPDATE, April 4th: Germany has accused the US of swiping 200,000 special FFP2 and FFP3 masks that were bound for Berlin and redirecting them to the US after being intercepted in Thailand. 3M disputed this, but the White House has been putting pressure on 3M to direct masks from its hub in Singapore to the US. 3M says that the administration has requested it to “cease exporting respirators” from the US to Canadian and Latin American markets. UPDATE, 18th April: Trump has been vacillating between saying that lockdown measures are too tough and then saying that they won’t be lifted. He has now been applauding efforts to ease the lockdown. It seems to me that he is trying to stay on both sides of the argument so if the outbreak gets worse he can say that he supported lockdown and if it doesn’t, he can claim he knew it wasn’t that serious and was on top of it all along! UPDATE, 8th May: US unemployment is now 14.7%, its highest level since WW2. Trump is blaming China for the coronavirus and is now threatening more tariffs if China doesn’t stick to what they agreed in January. UPDATE, 31st May: Trump postponed the G7 summit – which was supposed to have taken place in June – to September and said he thought that Russia, South Korea, Australia and India should be invited. UPDATE: 19th July: Joe Biden has a 5-point lead in Texas, a traditionally Republican – and extremely important – state in the election. Trump replaced his campaign manager, Brad Parscale, only four months before the elections due to slippage in his popularity. UPDATE 20th July: Trump and his administration are currently considering a ban on TikTok, citing data concerns. This follows a recent travel ban for some Huawei employees and other Chinese companies travelling into America and the stripping of trade privileges from Hong Kong as Trump now sees it as not detached enough from influence from the mainland. The animosity between the US and China continues…].
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: It seems that the frenzy of 2018’s tax-cut-and-big-tech-powered stock market boom has hit some hurdles in the form of higher interest rates, a cooling in sentiment towards the FAANGS in particular and the effects of the US-China trade war starting to bite This undoubtedly led the Fed to reverse last year’s interest rate hikes, turning them into cuts as the 2019 wore on. Talk of impeachment and collusion with Russia continues to hang around like a bad smell (this obviously led to Trump’s impeachment, but he hasn’t been kicked out of office) and I think that if Trump doesn’t sort out a solution for the trade war in the not-too-distant future, he will drag his country into recession by the end of the year. This won’t help his re-election chances in 2020 It was all looking a bit tricky for a while but Trump managed to cobble together trade agreements with his neighbours and China right at the end of the year – and while America is not in recession, the economy is slowing. Having said that, if his agreements stick, markets may well see momentum returning. Continued low unemployment levels and wage growth could underpin an economic sigh of relief).
•  Canada – Population: 36m, Unemployment: 5.9% (5.6%), Interest Rate: 0.25% (March) 0.75% (March) 1.25% (March) 1.75% (1.75%), 2019 actual GDP growth: 1.3% (versus expectations of 1.8%), 2020 forecast GDP growth: 1.7%, Leader: Justin Trudeau (Prime Minister). Overall: Justin Trudeau managed to survive scandals (including the “blackface” one) during his campaign and get re-elected, but his Liberal Party lost support and so he’s now presiding over a minority government. Interestingly, the leader of the Conservative Party, Andrew Scheer, stepped down right at the end of the year, so the opposition is in disarray once more after having gained some decent momentum. His reduced support will certainly make big changes harder to push through, especially as the opposition came so close to ousting him.
• [UPDATE, July 1st: Donald Trump’s replacement to NAFTA – the US-Mexico-Canada Trade Agreement – came into force today after three years of talks. There is talk of Trump reimposing tariffs on Canadian aluminium.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: PM Justin Trudeau will be going for a second term in October but the chances are that he won’t quite get the landslide result he enjoyed in 2015 (yep – that’s what happened!) because his opposition has managed to get its act together in the intervening years. His government is likely to spend more on infrastructure and tighten environmental rules (it seems that parties who advocated a more “environmental” stance benefited in this election – the Conservatives were notably lacking in this area) and the central bank is likely to increase interest rates (actually, it didn’t – it left them unchanged). China threatened Canada over the whole Huawei CFO arrest thing but it remains to be seen how long-lived that will be. It will also be interesting to see how the new Comprehensive Agreement for Trans-Pacific Partnership (CPTPP) – the replacement for the TPP abandoned by Trump – pans out as the treaty came in to force at the end of December 2018. Japan, Singapore, Mexico, Australia, Canada and New Zealand signed the agreement that cuts 18,000 tariffs and slashes many more over the coming years. Once Vietnam, Malaysia, Peru, Chile and Brunei have ratified the treaty, it will cover 13.5% of global GDP. It’s probably a bit early to tell how much of an impact this has had thus far, but I think that the new USMCA that replaces NAFTA will prove to be even more important One other thing to watch out for in 2019 is the possibility that the property market might come unstuck this year as rising interest rates and falling prices could catch people out and result in mortgage defaults. Actually, most housing markets in Canada have strengthened going into the end of 2019, helped by the country’s fastest population growth since 1990, strong employment, rising wages and falling mortgage rates. On the other hand, cities in western Canada have suffered from low commodity prices (this region has much more exposure to the energy sector – something that was evidenced in the general election where Trudeau was pretty much shut out as a protest to his environmental policies). Still, household debt levels are very high, so any wobbles in the market could prove to be very painful). 
•  Argentina – Population: 45m, Unemployment: 10.6% (9%), Interest Rate: 38% (March) 50% (Jan) 63% (59.41%), 2019 actual GDP growth: -1.7% (versus expectations of 2.2%), 2020 forecast GDP growth: -2.3%, Leader: Alberto Fernández (President, replaced Mauricio Macri). Overall: Macri’s painful economic reforms were too much to bear for the disgruntled electorate who put a Peronist back in power (Alberto Fernández, whose running mate was none other than previous president Cristina Fernández de Kerchner, aka “CFK”). It was the disastrous and corruption-ridden reign of CFK which led to Macri’s appointment in the first place, so I’m thinking that debt is going to feature quite prominently in 2020. The new government announced some big tax increases for the private sector and on personal wealth to bolster the coffers and avert a potential debt crisis, but only time will tell as to whether the measures will be enough.
• [UPDATE, January 19th: the national statistics agency announced on Wednesday 15th that prices rose by 3.7% in December alone, putting them in the top five countries for inflation in the world behind Venezuela, Zimbabwe, South Sudan and Sudan. Argentina’s current inflation rate is 52.9%, which is better than when it hit its peak in 1991 when it was at 84%! The country’s under pressure to come to an agreement with creditors about sovereign debt by the end of March and is aiming to bring the country’s inflation rate to under 40% this year, but a lot will depend on negotiations. If they go badly, inflation could go higher, UPDATE, April 18th: Argentina has made a punchy debt restructuring offer on $83bn of foreign debt, but some believe it could lead to yet another default. It is basically trying to avoid all debt obligations for the next three years and slash interest payments by 62%! Argentina’s finances are already shaky and their inflation level is sky high. More tough times ahead but Fernández will no doubt try to encourage an “us versus the world” mentality and dig his heels in. The drama continues. UPDATE, May 8th: Argentina missed a deadline to restructure $65bn of foreign debt, meaning that it could fall into default for the ninth time ever. UPDATE, July 19th: Fernández pleaded with the world to accept his final offer to restructure the $65bn debt. He said “This is what we can do – we can’t do any more”.].
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Macri has had a nightmare in 2018 as he had to defend sustained attacks on the peso which forced him to ask for help from the IMF. He has been trying to sort out the economic mess he was left with from predecessor Cristina Fernandez de Kirchner but has lost a lot of support along the way, which means that he is likely to approach the October elections in a weakened state (so much so, as it turned out, that he lost the election!). The bribery and corruption problems that have blighted the country for years are still ongoing and it seems that Macri is starting to adopt increasingly strong-arm tactics to combat them. Funnily enough, his chances at re-election could depend a great deal on the fortunes of Argentina’s neighbour and biggest trading partner, Brazil, as newbie right-winger President Jair Bolsonaro tries to bring in his own economic reform programme which might not be particularly favourable to Argentina Bolsonaro’s reforms haven’t given the economic boost that everyone was expecting in 2019, although they are expected to kick in in 2020, so maybe Argentina will be able to reap some benefit…). 
•  Brazil – Population: 209m, Unemployment: 11.6% (11.6%), Interest Rate: 2.25% (June), 3% (May), 3.75% (March) 4.25% (Feb) 4.5% (6.5%), 2019 actual GDP growth: 1.2% (versus expectations of 2.6%), 2020 forecast GDP growth: 2%, Leader: Jair Bolsonaro (President). Overall: Many economists predict that Bolsonaro’s pro-business policies will kick in properly in 2020 as expectations that they would do so in 2019 failed to materialise. He got a bit of a shock when Trump suddenly imposed taxes on steel and aluminium imports from Brazil towards the end of the year, citing his belief that Brazil actively weakened its currency to give itself an “unfair” trade advantage and a weakened Argentina, a key export market, also hit growth prospects. Having said that, lower interest rates (and therefore cheaper borrowing costs), investor-friendly reforms and higher spending by both businesses and individuals give Brazil a fighting chance of doing OK in 2020.
• [UPDATE, February 6th: Bolsonaro’s government said it will present a bill to Congress that would open up indigenous land to hydroelectric and mining projects, arguing that an opening up of the Amazon is key to tackling poverty. This will no doubt cause uproar both at home and abroad, but Bolsonaro argues that a lot of the currently protected land has a huge amount of mineral resources. UPDATE, March 4th: official economic growth estimates were cut due to concerns that the coronavirus outbreak would hurt exports UPDATE, March 27th: drug gangs and paramilitary groups are now enforcing social distancing (using violence) as Bolsonaro continues to dismiss the coronavirus as the “sniffles”. UPDATE, April 18th: Bolsonaro caused uproar by sacking his popular health minister, Luiz Henrique Mandetta as he continues to deny the seriousness of the coronavirus. Mandetta is a supporter of WHO guidelines on coronavirus whereas Bolsonaro is not. UPDATE, May 8th: there are rumours that Sergio Moro, who recently resigned as justice minister, could hasten the demise of Bolsonaro before he finishes his full term. Moro bristled at the way Bolsonaro was manipulating senior figures and has been responsible for jailing many in his battle to “clean up” the corrupt system. Some think that Moro could become a presidential candidate for the 2022 elections. UPDATE, May 31st: Brazil’s economy contracted in the first quarter of this year, meaning that it’s heading for recession. Bolsonaro continues to get heavy criticism for his muted response to the pandemic versus some other countries as the death toll rises. UPDATE, July 7th: arch coronavirus-denier Jair Bolsonaro tests positive. Oh the irony! He said at a press conference that “The number of deaths has increased not because of the virus but because of the fear of the virus”. Classic.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Strident right-winger authoritarian Jair Bolsonaro swept to power in late 2018 on an anti-corruption ticket but his pro-market agenda could face difficulties in a fractious congress where his Liberal Social Party only has less than 10% of the seats. He is Brazil’s first far rightwing leader for over thirty years and, according to a poll last month by Datafolha, 65% of respondents believe that the economy will get better in the coming months – the highest percentage in almost 20 years. Having said that, the man who is also seen by some to be the “Tropical Trump” gives some cause for concern as he has in the past talked about the liberalisation of gun ownership and been vocal in his disdain for women, homosexuals (he said that homosexuality could be beaten out of gay children) and black Brazilians. On the other hand, the country has a strong judiciary as well as an active opposition and independent media which should help to temper some of his more aggressive actions. The shift of Brazil’s relations away from socialist countries such as Venezuela and towards new allies such as Israel and the US will be interesting to watch unfold. Bolsonaro brought in some major landmark pension reforms in October, but momentum for other hoped-for changes slowed down as unemployment stagnated and household debt crept higher. The next big reform is likely to be that of its highly complex tax system – one of the most complicated in the world).
•  Mexico – Population: 126m, Unemployment: 3.6% (3.3%), Interest Rate: 5% (June), 5.5% (May), 6% (April) 6.5% (March)  7% (Feb) 7.25% (8.25%), 2019 actual GDP growth: -0.3% (versus expectations of 1.9%), 2020 forecast GDP growth: 1.2%, Leader: Andres Manuel Lopez Obrador (President, aka “AMLO”). Overall: Growth ground to a halt in 2019. Since he came into office, he has poured money into the state oil industry and infrastructure so things may yet get back on track (plus recent positive developments with the USMCA may help). AMLO remains popular, but has had to tone down the anti-Trump rhetoric which propelled him to office. Mexico has had to make some key concessions to keep the USMCA alive, but the electorate won’t be happy for him to continue to kow-tow to Trump forever
• [UPDATE, April 18th: Obrador is one of a few coronavirus deniers (along with Brazil’s Jair Bolsonaro, Belarus’s Alexander Lukashenko, Turkmenistan’s Gurbanguly Berdymukhamedov and Nicaragua’s Daniel Ortega) among world leaders and he has done a few “interesting” things over the past month or so like brandishing a six-leafed clover which he says will protect him against the coronavirus, ignoring social distancing guidelines and encouraging Mexicans to hug each other and go to restaurants. He has also gone further by ruling out the prospect of increasing borrowing, tax breaks or bailouts and continued with a programme of austerity with a second round of pay cuts for government officials. He is also pouring more money into favourite projects like building an oil refinery that will cost $8bn precisely at a time when oil demand is falling through the floor.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: AMLO, a left-wing populist, took office on December 1st, immediately cutting his own salary and insisting that no official should earn more than he does. He is to embark on an anti-corruption crusade and is even considering putting the last five presidents on trial for pushing policies that he blames for making Mexicans poorer He has been very busy on this front and continues to be keen to cut anything that he deems as being extraneous – especially “independent” institutions (e.g. Mexico’s export promotion and tourism boards and employees that he deems to be frivolous). A book that he wrote, entitled “A New Hope For Mexico: Saying No to Corruption, Violence, and Trump’s Wall”, that was published in English a few months ago, would suggest that he is unlikely to cosy up to his noisy neighbour Well he’s had to calm down on that front in order to get Trump to play ball. I expect that AMLO will have to make more concessions this year as Trump goes on the campaign trail). On the domestic front, he’s got some big promises to live up to including oil industry and education reform Mexico had a terrible start to the year as its economy contracted, job creation fell and construction activity was at its lowest ebb for 13 years, but he will obviously be hoping that his policies will start to bear fruit in 2020).

ASIA

•  China – Population: 1.38bn, Unemployment: 3.61% (3.82%), Interest Rate: 3.85% (May) 4.05% (Feb) 4.15% (4.35%), 2019 actual GDP growth: 6% (versus expectations of 6.2%), 2020 forecast GDP growth: 6.1%, Leader: Xi Jinping (President). Overall: The imminent signing of a “Phase One” trade deal with the US sounds like a positive start to 2020, with Trump talking up the prospect of a “Phase Two” to follow. I think that China’s growth rate will continue to slow gradually as the economy continues to mature under Xi Jinping’s tight control. An interesting development this year could be China taking a pivotal role in mediating between the current spat between South Korea and Japan, which is probably even more in its interest these days given the troubles it had when Huawei wasn’t allowed to use any US components in its devices (the implication here being that China should benefit from South Korea/Japan supply chains). I suspect that whatever happens with trade agreements, China will continue to try to work towards technological independence wherever possible
• [UPDATE, January 25th: The coronavirus outbreak spooked markets but things are getting worse as time goes on with more deaths being reported as it continues to spread around the US, Europe and Asia. China has now shut down 10 cities around Wuhan and put major restrictions on transportation. Researchers at the University of Queensland in Australia think they can have a vaccine into six months. It is one of three teams being funded by the Coalition for Epidemic Preparedness Innovations, which is a global non-profit that develops vaccines against new infectious diseases. The two other teams are Inovio Pharmaceuticals (which is listed on NASDAQ) and Moderna. If things continue to get worse, in addition to more people dying, China’s GDP could fall further. UPDATE, 25th March: China eases travel restrictions in and out of Hubei province, but keeps Wuhan restrictions in place until April 8th. UPDATE, 1st April: manufacturing activity appears to be picking up, which could be an early sign of a return to normality. UPDATE, April 18th: China has been easing lockdown restrictions now for the last week or so, but there is a background fear of a “second wave”, especially as Chinese nationals have been returning home from Russia. The world will be watching what happens in China and learning how to respond. Also, the National Bureau of Statistics reported the first official year-on-year fall in GDP for over 40 years. Q1 GDP fell by 6.8%. President Xi is facing two potentially big problems: a second wave and a lack of demand for its exports in the US and Europe. UPDATE, May 31st: Over this last week, China has angered many in the international community by moving to impose a new national security law in Hong Kong that will give Chinese law priority over local laws. The US, Australia, Canada and UK issued a joint statement condemning Beijing’s actions, the US revoked special trading privileges for the territory because it says that Hong Kong is not independent enough from China, the UK has offered to speed up British citizenship for over 300,000 residents and now China is threatening countermeasures. UPDATE, July 2nd: China imposed a new National Security Law on Hong Kong, effectively bypassing the territory’s legal system. This created uproar in Hong Kong and around the world. UPDATE: July 16th: Chinese GDP grew by 3.2% in Q2, making it the first major economy to return to growth since the outbreak started]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: The economy looks like slowing down and it seems that China’s previously bullish outlook has actually been dented more than it expected in the face of Trump’s tariffs It most certainly has! The country is suffering from weakening household spending in addition to slowing industrial output and investment. That said, Xi Jinping is putting into place measures intended to get things back on track like loosening credit restrictions and implementing more tax cuts to spur investment. As far as the US-China trade war goes, it has decided to pull back (on the surface, at least!) on its “Made in China 2025” programme which was announced back in 2015 with the goal of making China an advanced manufacturing leader within a decade in a number of areas including robotics, clean-energy vehicles and biotechnology. Trump has criticised this plan saying that it is protectionist (pot-kettle-black!) and China has responded by revisiting it and simultaneously relaxing restrictions of foreign company ownership which has actually resulted in companies like JP Morgan getting more freedom run their own businesses in China rather than being forced into a joint venture with a Chinese competitor. The current year-end GDP growth target is 6.5% and many will be watching closely to see whether this is met and whether the year-end target for 2019 will be lower. China’s economy had a largely underwhelming 2019 what with continued and sustained Huawei-bashing, trade clashes with the US and annoyances with all the Hong Kong protests. Car sales falling through the floor and generally sluggish consumer spending have all contributed to slowing momentum.
•  Japan – Population: 126m, Unemployment: 2.5%, Interest Rate: -0.1% (-0.1%), 2019 actual GDP growth: 1.8% (versus expectations of 1.4%), 2020 forecast GDP growth: 0.4%, Leader: Shinzo Abe (Prime Minister). Overall: It seems to me that everyone is worried that Japan’s growth momentum will slow after a very successful Rugby World Cup and upcoming Olympic Games. However, the fact that PM Abe launched a massive $121bn stimulus package at the end of 2019 that will go towards repairing typhoon damage as well as investments in infrastructure and new technology shows that he is at least doing something now to avoid a “hard landing” when the Olympics are over. The consumption tax (Japan’s VAT equivalent) hike from 8% to 10% in October was obviously well-flagged but got everyone in a flap about what that effect would be on consumer spending (it fell).  Looking slightly further out, Abe’s term as leader of the Liberal Democratic Party is due to come to an end in 2021, so investors will be wanting to know what sort of direction Japan will be taking when that happens and whether he will want to continue as leader of the party and/or as PM. It’s possible that he could bow out on a high after the Olympics this year and take a potential protégé under his wing, but like I say, investors will want to get some kind of visibility in order to maintain confidence in the economy
• [UPDATE, February 27th: the ongoing spread of the coronavirus puts the Tokyo Olympics in jeopardy – and a final decision of whether they are to go ahead as planned will be made by the end of May. UPDATE, March 15th: the Ministry of Finance announced new bill to stop foreign takeovers in “core” companies in 12 sectors including nuclear facilities, cyber security and telecoms, UPDATE, March 24th: the Olympics and Paralympics have been postponed until next year due to the coronavirus. The Olympics will now take place between July 23rd and Sunday August 8th 2021. The Paralympics will take place between 24th August and 5th September 2021. UPDATE, March 28th: panic ensues after the governor of Tokyo, Yuriko Koike, urges people to stay indoors only 24 hours after the Olympics had been officially cancelled. UPDATE, April 16th: PM Abe declared a state of emergency across the whole country (it’s only been region-specific so far) and that he would be giving citizens a one-off sum of $1,000 to help them through. UPDATE, May 26th: Japan lifted its nationwide state of emergency although many businesses remain closed. UPDATE, July 20th: UK-Japan trade negotiations are ongoing and Japan is pushing for an agreement by the end of the year – an incredible timetable considering these things normally take years!].
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Shinzo Abe was recently re-elected for the third time as PM and leader of the Liberal Democratic Party, putting him on course to be the longest serving PM in modern times. He will be using this position of power to reform the pacifist constitution, putting it to a referendum. Actually, PM Abe has delayed doing this because his ruling coalition failed to get enough support in the Upper House of parliament in a summer vote. This has been contentious for years and has been used as an excuse/explanation (depending on your point of view) for Japan being unable to be more forthright in its military actions. China in particular will make a song and dance about it given what Japan did the last time they were allowed to scale up, but I suspect that other countries in the Pacific will (secretly) welcome the prospect of a more powerful military presence in the region given concerns of the US potentially downgrading their capabilities. It will be interesting to see how Abe’s new initiatives to accept more foreign workers will impact the economy. This move is way overdue as Japan has long seen labour shortages (mainly due to an ageing population) and done b*gger all about it. FWIW, I think that Japan will get more investor attention as it heads into the Rugby World Cup this year and then into the Olympics next year. If nothing else, there will be more tourists! I would add here that the success of the Rugby World Cup and the overwhelmingly positive feedback the country received will no doubt lead to a very successful Olympics in terms of visitor numbers despite the fact that many parts of Japan are an absolute nightmare in July/August in terms of heat and humidity. The Paralympics may be slightly less harsh in that regard!
•  South Korea – Population: 51m, Unemployment: 3.6% (3.8%), Interest Rate: 0.5% (May) 0.75% (March) 1.25% (1.75%), 2019 actual GDP growth: 2% (versus expectations of 2.8%), 2020 forecast GDP growth: 2.2%, Leader: Moon Jae-in (President). Overall: As far as I can see, fortunes for Asia’s 4th largest economy will depend largely on a) a China rebound (China is its biggest export market), b) improved relations with Japan and c) positive developments with its North Korean neighbour. 2019 was a bad year for South Korean exports, but an uptick in exports to China in December (the first increase for 14 months), a recovery in the semiconductor market (semiconductors account for about 20% of South Korea’s exports) from last year’s lows and the rolling out of the biggest fiscal stimulation programme since the financial crisis – plus the Bank of Korea cutting interest rates to a record low of 1.25% – would suggest that 2020 should be a decent year. Relations between South Korea and Japan are pretty disastrous as they can’t agree on monetary reparations for forced labour of South Koreans during Japanese occupation in the second world war. South Korea’s Supreme Court could really stoke the fire in 2020 by proceeding with plans to liquidate assets seized from Japanese companies identified in an earlier ruling about forced labour, which would really anger the Japanese. This is going to be a very tricky negotiation given that both sides have very nationalist stances and will not want to be seen by their citizens as “giving up” on what many feel very strongly about. Generally speaking, though, 2020 should be a solid year for the South Korean economy
• [UPDATE, April 16th: President Moon Jae-in’s government bolstered its power in the legislative elections held on Wednesday 15th as citizens appeared to give him the thumbs-up for his coronavirus response thus far. However, his original plans for the economic reform of conglomerates (called chaebol) and peace with North Korea may have to take a back seat as the president will have to prioritise the sheltering of his country from coronavirus-related economic fallout. BTW, this is the first time that his ruling Democratic Party has had a majority for 16 years. UPDATE, June 16th: North Korea blew up the inter-Korean liason office near the border and rejected a South Korean offer to send a special envoy for negotiations. Tensions increased…(but let’s face it, most of this is just noise)]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Moon Jae-in is surfing a wave of popularity at the moment following ongoing talks with North Korea. Although talks have stalled somewhat of late, the North Korean leader Kim Jong Un expressed hope for a peaceful 2019 in a two-page letter received in the South on Sunday. It remains to be seen whether the denuclearlisation b*llshit flying between Trump and Kim Jong Un in particular will actually amount to anything at all (it didn’t), but wouldn’t it be nice. It would seem that Moon Jae-in is successfully navigating his country through the corruption scandals that resulted in the downfall of his predecessor – so long may that continue Moon Jae-in seems to have steadied the ship somewhat since he has been in power but he needs to resolve the Japan thing asap otherwise the repercussions will start to filter through to the economy more broadly. God knows what he’ll achieve with North Korea, though!).
•  India – Population: 1.29bn, Unemployment: 8.5% (3.52%), Interest Rate: 4% (May) 4.4% (March) 5.15% (6.5%), 2019 actual GDP growth: 4.5% (versus expectations of 7.6%), 2020 forecast GDP growth: 6.7%, Leader: Narendra Modi (Prime Minister). Overall: India’s GDP growth has collapsed from around 8% to 4.5% over the last 18 months because of major problems in the banking system and real estate sector. However, Modi – who was re-elected for a second term and now enjoys the biggest parliamentary majority since 1984 – will continue with his Hindu-nationalist agenda (which is actually causing him problems at the moment with violent protests against a new citizenship law which discriminates against Muslims by not including them in a newly-created legal loophole) and economic reforms, which will include bolstering the banks and relaxing foreign investment rules. India stripped Kashmir of its special status in August and so there will be an increased possibility of terrorist attacks to contend with
• [UPDATE, February 4th: India’s finance minister unveiled the new budget on February 1st at a time when the country has seen six consecutive quarters of falling growth, rising unemployment and concerns from business as to whether the government’s economic policies are really working. The package that was announced aimed to boost spending by cutting taxes on lower-middle class families and companies and boosting rural spending by about 13% to help farmers. Protectionist measures persist on imports, but there will be further disposals of $30bn of public assets to help pay for everything. The general feeling is that the measures don’t go far enough to drag India out of its current rut. UPDATE, Feb 10th: PM Narendra Modi suffered a big defeat in Delhi’s city election as his BJP party was thrashed by Arvind Kejriwal’s Aam Aadmi (Common Man aka “AAP”) party as divisions between the haves and have-nots widens. UPDATE, March 27th: PM Narendra Modi imposed a strict 21-day nationwide curfew on India’s 1.4bn population to combat the spread of the coronavirus. However, he didn’t really give anyone much warning, so supply chains suffered a sudden shock affecting the availability of items such as food, pharmaceuticals, soap and disinfectant. UPDATE, April 14th: Social unrest continues as migrant Indian workers protested in Mumbai against the extension of the coronavirus lockdown and demanded to be able to return to their villages. Thousands of rural migrants have been stuck in Mumbai without work since the lockdown. PM Modi said that the lockdown, which was to have ended this Wednesday, has been extended until May 3rd. UPDATE, May 4th: India lifted its ban on alcohol on Monday after six weeks of strict prohibition under lockdown. UPDATE, May 25th: India has eased restrictions in the last few days to allow the reopening of shops selling “non-essential items”, resulting in Indians flooding the markets after being under strict lockdown. UPDATE, June 18th: Chinese and Indian soldiers clashed on the Himalayan border and 20 Indian soldiers died. Anti-Chinese feeling gained momentum as a result. UPDATE, June 30th: India banned 59 of China’s most popular mobile phone apps in India – including TikTok and WeChat. Indian companies are desperately looking to alternatives to China in their China-heavy supply chain. Some industries, such as pharmaceuticals have a massive reliance on Chinese imports.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Narendra Modi is  having a tricky time of it at the moment as his Hindu nationalist party, Bharatiya Janata Party (BJP), got a right kicking in the most recent regional elections. Many had seen his re-election this coming Spring as a foregone conclusion, but the BJP’s main opposition – the left-of-centre Congress Party – has been making ground. Although he continues to be a popular figure, his tax-and-spend economic policies just haven’t worked and he has shied away from making more contentious reforms (like selling off loss-making state-owned companies and privatising banks) that would have let market forces play a more prominent role in India’s inefficient economy. He has failed to raise incomes whilst simultaneously frightening off millionaires and business investment by cracking down on taxes. At this moment in time, it looks like whoever wins the upcoming election will do more tax-and-spend, which could ultimately clip the wings of India’s true growth potential Modi won by a landslide and has used his increased majority to push his agenda – which has, latterly, involved sending in the army to quell protests and switching the internet off in troublespots etc.).
•  Australia – Population: 23m, Unemployment: 5.3% (5.1%), Interest Rate: 0.25% (March), 0.5% (March) 0.75% (1.5%), 2019 actual GDP growth: 1.7% (versus expectations of 2.3%), 2020 forecast GDP growth: 2.3%, Leader: Scott Morrison (Prime Minister). Overall: Scott Morrison confounded the polls in May when he led his coalition government to another election victory, but given the current backdrop his climate-denial stance is proving to be embarrassing. Mind you, if he can weather this particular storm and avoid a recession in 2020, I think that he will stand a good chance of staying in office. It’s not looking great for him at the moment, but if China demand starts to pick up again for Aussie exports of commodities for use in infrastructure projects etc. then recession could be avoided and Morrison will be able to sweep his recent embarrassments under the carpet. If, however, Australia does fall into recession for the first time in almost 30 years, Morrison will forever be labelled as the man responsible – and no doubt all his other gaffes will be put under an unflattering light.
• [UPDATE: July 17th, Melbourne is back under lockdown again – this time for six weeks and the restrictions will be tighter – after a sharp increase in coronavirus cases. It’s estimated that it will cost the economy of Victoria about $700m a week until the restrictions are due to be lifted on August 19th.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Australia faces a difficult year ahead with what looks like a very bloated property market in danger of popping, a mining sector going through a post-boom hangover and a banking system that is under judicial review. The post of Aussie PM has been a revolving door with six leaders in the last ten years and current incumbent Scott Robinson took charge in 2018 after a leadership challenge with previous leader Malcolm Turnbull last year. Robinson may have put a stop to all this, however, as his party has just revised the rules on changing leaders necessitating a higher majority of party members to vote for it in future.  He has recently brought forward the national budget to just before the election (due in May) in the hope that spending freebies will encourage voters to keep his party in office. Interestingly, despite all of this political instability, Australia has not had a recession for over 25 years Australia has had a turbulent year, what with a number of successive interest rate cuts taken to avoid the prospect of the aforementioned recession and a strengthening of PM Scott Morrison’s hand in the May Federal Election, only to end the year amid strong criticism of his environmental policies as well as his own personal priorities when he went on holiday to Hawaii while firefighters at home died putting out fires).
•  Indonesia – Population: 263m, Unemployment: 5.28% (5.34%), Interest Rate: 4% (July), 4.25% (June), 4.5% (March), 4.75% (Feb) 5% (6.0%), 2019 actual GDP growth: 5.02% (versus pre-tsunami expectations of 4.9%), 2020 forecast GDP growth: 5%, Leader: Joko Widodo (President). Overall: Joko Widodo (aka “Jokowi”) will be going full-on into an ambitious economic growth programme to improve infrastructure, education and foreign investment. In order to finance it all, it looks like he will be cosying up to the Chinese – and specifically, the Beijing-based Asian Infrastructure Investment Bank (AIIB) – to help fund the $31bn construction of Indonesia’s new capital city that will move from Jakarta on Java to Kalimantan on the island of Borneo. The new capital will be home to Indonesia’s administrative functions but Jakarta will remain the commercial and financial centre. AIIB seems to be flexible enough to provide the financing that will enable the move to the new capital in 2024 and plans for the new city are expected to be finalised in the first half of this year. Widodo is also planning on creating “10 New Balis” in an effort to spread the benefits of tourism more widely – and this will involve even more spending on airports, amenities and other infrastructure. Exciting times!
• [UPDATE, April 18th: things could be getting tricky in the country because up to 20m people are expected to travel across the muslim-majority nation for end-of-Ramadan celebrations but there is no clear policy from the government as to what they will do given the coronavirus. Some migrant workers have already gone home and there are fears that those travelling from Jakarta may be spreading it to their home towns and villages. Thus far, Joko Widodo has refused to put in place a nationwide lockdown.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: This country of 18,000 islands has suffered a great deal at the end of the year with a volcanic eruption, aftershocks and subsequent tsunami killing thousands and destroying houses, resorts and whole communities. The government currently estimates the cost at more than $2.4bn – but to give you an idea of scale, Indonesia’s finance ministry estimated the annual economic loss from disasters between 2000 and 2016 at $1.4bn. The government will clearly have to invest a huge amount of money in the clear-up operation, utilities and disaster response. Joko Widodo’s  re-election in the April general elections will no doubt depend heavily on how his actions are perceived over the coming months Widodo did indeed get re-elected and got busy with plans to “upgrade” the country. This will cost an enormous amount of money, but the hope will be that it will be repaid many-fold by more jobs, more spending and more tourists).

EUROPE

•  UK – Population: 65m, Unemployment: 3.8% (4.1%), Interest Rate: 0.1% (March), 0.25% (March) 0.75% (0.75%), 2019 actual GDP growth: 1% (versus expectations of 1.5%), 2020 forecast GDP growth: 1.1%, Leader: Boris Johnson (Prime Minister, replaced Theresa May). Overall: Well! What a dramatic end to a rather eventful year! Unfortunately, we are not going to get away from Brexit chat in 2020 as trade negotiations with Brussels will continue in earnest as more details are hammered out – so any initial euphoria is likely to be shortlived. Many economists predict the UK economy going sideways this year, especially as Boris Johnson has made his job harder by setting a hard deadline of the end of this year for concluding talks with the EU with or without a deal. Consensus also suggests that a sustained economic recovery won’t be possible until a more detailed trade agreement is put in place. It’ll also be interesting to see how feisty Nicola Sturgeon gets about another Scottish independence referendum because whatever she says about Scotland wanting to stay in Europe, I don’t think it’s a done deal as to whether Europe actually wants Scotland. That’s not being nasty – it’s due to the fact that, if Europe accepts Scotland in its own right, there could be a massive push for independence in other countries, like Catalonia from Spain, for instance (but there are others in Eastern Europe as well as those wanting independence from France, Italy, Denmark, Belgium, etc.). It will also be interesting to see how much of Scotland’s financial sector moves out of the country given all the uncertainty and you do wonder what will happen with the country’s oil industry as many operators in the North Sea are starting to wind down. Anyway, I think that the UK may well perform better than consensus is suggesting because the labour market continues to be tight, wages are still pretty strong and although our Brexit future is far from certain at least there is slightly more clarity on the direction we are taking
• [UPDATE, January 31st: The UK left the EU. February 6th: Brexit has strengthened Scotland’s claim for independence on the one hand, but exposed its stark financial weaknesses on the other. Donald Tusk, former EC president, stirred things up by saying that Brussels would be keen for Scotland applying to join the EU but it isn’t a given and it’s also not clear as to whether the sums would actually add up, especially when you consider that Scottish exports to the rest of the UK are over triple those that go to the EU. In 2018, 60% of Scottish exports went to the rest of the UK, over 19% to the EU and over 20% to the rest of the world. Separation negotiations are likely to be highly complicated. Elsewhere, property prices continue to climb post last year’s General Election in a “Boris bounce”, especially in London. UPDATE, March 28th: (from me), the Bank of England has cut interest rates to 0.1%, the lowest level in the Bank of England’s 325-year history, the schools were locked down from Monday, March 23rd as home-schooling for many started in earnest and BoJo himself tested positive for the virus on March 27th and is now in isolation. Rishi Sunak has unveiled a government underwriting of 80% of people’s wages and 80% of the income of self-employed up to a ceiling of £2,500 per month. UPDATE, May 6th: Sunak’s “bounce back” loans scheme to small businesses has proved to be extremely popular, with a £2bn take-up on the first day. Negotiations are continuing re the delay of the furlough scheme to avert mass unemployment. UPDATE, July 20th: Sunak has made ]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Brexit is supposed to happen on March 29th but there is still a great deal of uncertainty as to what that deal (if any) would look like – and there is the increasing possibility of a second referendum. What happens regarding Brexit is the single biggest issue facing the UK economy in 2019 – and the repercussions could be felt for years and decades to come. Investment in the UK is even more unlikely than before given the increased uncertainty at the moment. However, IF the UK abandons Brexit, I would expect the pound, the stock markets and investment to shoot up almost overnight. Europe would also breathe a massive sigh of relief and I think it would galvanise the whole bloc, which appears to be falling apart at the moment (Germany has a zombie leader, France’s swashbuckling youngster has come a cropper and Italy and Spain continue to be problematic, not to mention a changing of the guard in the EU with European elections coming up). Other than that, a no-deal looks unlikely and if May’s current deal manages to limp through (possibly with some minor changes, although that is currently looking rather shaky) I suspect we could slowly slide into recession initially, although I think we could recover sooner than everyone currently thinks because a lot of negativity is already factored in and at least there would be slightly more certainty about our position regarding Europe. Who knows, we might even be able to get in on the new-TPP party (although I don’t think anyone should get too excited about that 2019 certainly built up into an enormous crescendo with a dramatic end to the decade! Not only did we change PM, but Boris Johnson’s government won a huge majority in the general election that will help him put through changes much more easily. The magnitude of victory has already caused a lot of soul searching from parties and individuals who did particularly badly).
•  Germany – Population: 80m, Unemployment: 3.1% (3.3%), Interest Rate: 0% (0%), 2019 actual GDP growth: 0.5% (versus expectations of 1.8%), 2020 forecast GDP growth: 0.9%, Leader: Angela Merkel (Chancellor). Overall: Germany has had a right old shocker in 2019 with weakening manufacturing exports and overall political tetchiness between members of a very fragile and testy coalition government. Merkel remains a shadow of her former self as leader of this coalition with the Social Democrats and will be hoping that her chosen successor, Annegret Kramp-Karrenbauer (aka “AKK”) will get up to speed before she steps down. I think that any kind of relief from Donald Trump on manufacturing import tariffs on German products will go a long way to improving sentiment but I must say that I don’t see any short-term catalysts. Now that he’s sorted out a partial trade deal with the Chinese, Trump is widely expected to tighten the screws on trade with Europe. That will obviously include Germany, so things could get painful.
• [UPDATE, Feb 11th: the potential successor to Angela Merkel – Annegret Kramp-Karrenbauer – stepped down from the leadership of the CDU and said she would not stand for election as Chancellor, leaving the door open to other candidates. UPDATE, Feb 19th: pressure continues to mount for Merkel to step down early as the search for a new CDU party leader begins in earnest. UPDATE, March 28th: after a torrid period being surrounded by political in-fighting, Merkel is  coming back to the fore. For the first time in her 14 years as Germany’s chancellor, she went on national TV to address the nation and her calmness has struck a tone and her popularity, as well as that of her party, has increased. Even her political opponents approve of her no-nonsense style – Green MP Konstantin von Notz said earlier this month that “In a crisis like this we can only be happy that we have a chancellor like Angela Merkel”. All eye will be on her not only for Germany’s future, but for Europe’s as well. UPDATE, May 6th: Germany’s highest court challenges the ECB’s massive bond purchasing programme designed to stimulate the European economy, ECB president Lagarde bats it away but the court wants a proper answer as to what the programme is trying to achieve otherwise it will stop the Bundesbank from participating. UPDATE, May 19th: Merkel and Macron proposed a joint initiative to deploy a proposed European coronavirus recovery fund to help poorer countries in the bloc get their economies back on their feet. It sounds like a step in the right direction, but any kind of plan like this needs the other 25 members to approve its implementation]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Germany is in a tricky place at the moment – and has been since it took six months to form a fragile coalition government that everyone could live with after the general election result at the end of 2017. Although Merkel continues in her role as leader, everyone is trying to position themselves as her successor – meaning that probably nothing much of substance is going to get done during the course of 2019. If you couple this listlessness with US tariffs, Brexit shenanigans and increased pressure on car emissions via tighter regulations affecting one of Germany’s major industries you have a recipe for sluggishness IMHO Germany appears to me to be in limbo at the moment and Merkel’s seeming desire for a quiet life heading into the end of her reign in 2021 is letting the younger and feistier President Macron slime his way into the more central European role that Germany has traditionally occupied. Germany narrowly avoided recession twice this year. All is not well within the traditional engine room of Europe’s biggest economy).
•  France – Population: 67m, Unemployment: 8.6% (9.1%), Interest Rate: 0% (0%), 2019 actual GDP growth: 1.4% (versus expectations of 1.6%), 2020 forecast GDP growth: 1.3%, Leader: Emmanuel Macron (President). Overall: Emmanuel Macron will be busy this year with implementing measures to boost productivity, create jobs and cut taxes. Having said that, he’ll first have to win the battle with public sector unions who have been striking since December last year over his efforts to simplify 42 existing state pension schemes. It’s like the gilets jaunes all over again! Other than that, the economy should benefit from more relaxed labour laws and lower corporate taxes. 5G mobile services will be rolled out this year. Fun fact: the number of businesses created since Macron came to power has increased by 45% as he has cut bureaucracy and taxes and promoted innovation by giving financial assistance and special visas for those in the tech sector to nurture talent
• [UPDATE, January 19th: Edouard Philippe, France’s PM, withdrew a plan to increase the official retirement age from 62 to 64 to appease the pension protesters, but obviously the more militant movements said that they’d continue with the strikes. UPDATE, January 30th: Marine Le Pen, France’s far-right leader who was obliterated in the country’s general election in 2017, seems to be making a comeback as President Macron’s popularity is plunging BUT I would say that this isn’t anything to get too concerned about at this stage – Macron is just over half way through his presidency and this kind of thing often happens mid-term. Still, his popularity overseas is not reflecting the domestic situation and his continued efforts to make unpopular reforms to the public sector continue to feed resentment. UPDATE, April 16th: Macron is urging more leniency by the EU to poorer southern European countries regarding bailout conditions. Italy was infuriated by the deal European ministers came up with last week and some, such as Macron and Ursula Von der Leyen, president of the European Commission, made conciliatory noises but not much else. Basically, countries like Germany and the Netherlands don’t want their citizens to have to stump up for their neighbours. UPDATE, April 17th: Germany is cautiously lifting some of the lockdown restrictions and said that it would let shops of up to 800m² area to open next week in addition to car dealers, bicycle shops and bookstores – again, with strict distancing rules in place. Schools would open from May 4th and hairdressers would also being given the green light to operate. UPDATE, May 31st: Macron is losing popular support due to his response to the pandemic. Although things seemed to be going in the right direction pre-outbreak – a decline in unemployment, tighter control of public spending etc. – it all seems to be falling apart now after three years in office. He’s still got two years before the presidential elections, so this may be seen by some as a severe case of mid-term blues=]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Wow! Talk about a fall from grace for France’s youthful president who swept to power amid great drama in 2017. He managed to follow the victory up with a further strengthening of power in the legislature and then started to push through some much needed (and tricky) reforms whilst also taking a higher profile role in Europe as Merkel’s position weakened. That all came to a shuddering halt in November when the amorphous gilets jaunes movement kicked him in the balls by protesting violently against his proposed fuel and wealth taxes. He has since had to backtrack on these proposals but sounded a note of defiance in his traditional New Year’s Eve address to the nation, saying that he would press ahead with more economic reforms Macron has indeed pressed ahead with more economic reforms, but he has had to make concessions in response to the gilets jaunes protests such as cancelling the rise in fuel taxes, which altogether account for about 1% of GDP, according to some estimates. He needs to show some wins very soon otherwise his popularity will continue to plummet – it halved to 20% over the course of last year – and further changes may become more difficult to implement. Given his political strength when he came to office, I think that if he can’t reform France, no-one will be able to. He has got an uphill battle this year and he cannot cave to protesters – if he does, he is toast IMHO. Pensions and benefits reform will be next on the agenda Macron has actually done reasonably well this year considering the fact that he has taking on some very tricky issues that have defeated predecessors. He managed to put a bit of a dent in unemployment this year and the French economy has been more resistant to the global slowdown than other countries in the EU. He is aiming to reduce unemployment to 7% by 2022, so is at least going in the right direction).
•  Italy – Population: 62m, Unemployment: 9.7% (10.6%), Interest Rate: 0% (0%), 2019 actual GDP growth: 0.3% (versus expectations of 1.1%), 2020 forecast GDP growth: 0.4%, Leader: Giuseppe Conte (Prime Minister). Overall: 2019 has been rather eventful, from a political standpoint, in Italy. Dramas included the continued battle with the EU over Italy’s spending plans and Prime Minister Giuseppe Conte offering his resignation in August after just over a year of presiding over a very unstable and divided coalition. However, a new coalition government came together in September with Guiseppe Conte as leader, consisting of the leftwing anti-establishment Five Star and the centre-left Democratic Party. It looks like it will be less confrontational than the previous coalition, but Italy’s debt problems remain and it needs to do some serious work on reducing them. Fortunately, the new administration managed to hold it together enough to agree a new budget in October that would appear to be able to keep everything on an even keel for the time being (it called for tax cuts for lower earners and a clampdown on tax evasion, whilst avoiding an increase in VAT, among other things). Having said that, the leader of the right wing nationalist Northern League – eurosceptic Matteo Salvini – continues to agitate (he was the one who sparked the Conte no-confidence vote in the summer) and is likely to be a thorn in the side of the coalition for some time to come
• [UPDATE, January 24th: Italy is facing more potential turmoil as the anti-immigration Matteo Salvini (leader of the right-wing League party) continues to try to destabilise the current coalition government going into the regional elections. It looks like he’s trying to turn this vote into a referendum on the coalition. This is his latest attempt at rocking the boat as Salvini tried to call national elections in summer 2019 only to be thwarted by the unlikely alliance between his “ex” coaltion partner Five Star and the Democratic Party (PD). Luigi Di Maio, leader of Five Star, stepped down this week following in-fighting within his party who don’t like being in a coalition with the PD. UPDATE, January 27th: Salvini was defeated, removing the immediate threat of another snap election (at least for the time being!). This had the immediate effect of boosting the bond market as investor confidence returned. UPDATE, Feb 13th: Salvini courts more controversy as he loses immunity and faces trial for blocking a migrant boat while in office. UPDATE, March 28th: (from me) Italy is in crisis. The healthcare system in the most affected region, in the North, is at breaking point but the whole country is in particularly difficulty because it has the highest proportion of citizens aged over 65 and the second oldest population in the world after Japan. UPDATE, April 17th: there is a cautious lifting of some lockdown restrictions as Italy has allowed bookshops, stationary stores and apparel retailers for young kids to open from Tuesday this week, although the nation is still in lockdown until at least May 4th].
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Italy has a weird coalition of the right-wing anti-immigration Northern League and leftwing anti-corruption Five Star Movement which took ages to cobble together after the initial election result in March. Italy’s deputy prime ministers – Matteo Salvini (Northern League) and Luigi Di Maio (Five Star) – have equal status in theory under prime minister Giuseppe Conte but it is Salvini who dominates in the PR stakes with talk of closing borders and nationalist rhetoric. It is likely that he will try to push for an early vote to get more power but he may try to get more support before launching a full-scale assault on the top job. Salvini did indeed try to make a power grab at the end of the summer, but it didn’t work. Salvini has been sidelined for now, but given that Italy has a fragile coalition government at best, you would have thought that Salvini will strike again at a moment of weakness. The coalition managed to swerve European ire by reigning in their initial proposed budget demands – but I don’t think this is a long-term solution to Italy’s sluggish economy. Italy continues to be a basket case).
•  Spain – Population: 49m, Unemployment: 13.92% (14.55%), Interest Rate: 0% (0%), 2019 actual GDP growth: 2% (versus expectations of 2.3%), 2020 forecast GDP growth: 1.9%, Leader: Pedro Sánchez (Prime Minister). Overall: Spain had another turbulent year in 2019, culminating in its fourth general election in four years in November! Even then the final result wasn’t exactly what you would call conclusive! Fast forward a couple of months to the beginning of January 2020 and Sánchez was confirmed as Prime Minister by 167 to 165 votes – talk about a wafer thin margin! The new coalition, which includes communists (Podemos) for the first time since the civil war in the ’30s, will have its work cut out getting anything done given its fragility but it talked a good game about hiking taxes for big companies, cutting carbon emissions and cracking down on gender-based violence. None of this will solve the whole Catalonia independence thing, which continues to bubble away in the background. Sánchez had to rely on abstentions from the Catalan (ERC) and Basque (EH Bildu) seperatists to “win” the vote and I would have thought that they are going to want to see payback, which could create even more instability down the road. The economy has seemed to do relatively well despite all this instability, but I don’t think it can last
• [UPDATE, January 29th: Catalonia is set to hold early elections. Spain’s ruling coalition will be hoping that the separatists will lose as Madrid sees it as “obstructionist and confrontational”. Catalonia has been in limbo since it held an illegal referendum in 2017 and declared its independence. UPDATE, February 28th: the Spanish government won an important parliamentary vote that backs its deficit proposals meaning that it is getting closer to approving a new budget. This is a major step forward for a country that has been in political deadlock for the last to years. The leftwing government wants to make higher earners pay more tax in order to finance increased spending. UPDATE, March 28th: Spain is now only behind China, the US and Italy in terms of the number of confirmed cases of coronavirus and has come under criticism for acting too slowly, with a trajectory of deaths now steeper than Italy’s at the same stage. UPDATE, April 16th: new figures released by Catalonia and Madrid show that the official coronavirus death count could actually be at least 40% higher than the official total announced so far as they include figures from care home deaths. UPDATE, April 18th: the country has allowed factory and construction workers back this week as part of a cautious lifting of strict lockdown measures but most shops and services are still closed. UPDATE, May 9th: Spain is to begin “phase one” of the transition from lockdown on Monday 11th when restaurants and bars can serve clients outside, shops selling non-essential items can open and private gatherings of up to 10 people can be held]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Although the country is enjoying positive momentum in terms of employment (which, let’s face it, is coming from a very low base), wages and spending, its government is incredibly weak, with the “ruling” Spanish Socialist Workers’ Party accounting for only 84 out of 350 seats in the lower chamber of parliament. Given the plethora of political parties pushing their own respective agendas, it would not be surprising to see an early election – and the far-right Vox seems to be on a roll at the moment, winning 11% of the vote in a regional election last month. Sanchez will also have to contend with continued pressure from the Catalonian seperatists (although, TBH, they are the least of his worries) As I said above, Spain finished 2019 with its fourth election in four years. Although Spain now has a “Prime Minister” rather than a “caretaker Prime Minister”, the political situation is far from resolved as the political landscape is so fragmented. It will be extremely difficult to get anything done as everyone seems to be pushing their own little agendas).
•  Turkey – Population: 81m, Unemployment: 13.8% (11.4%), Interest Rate: 8.25% (May), 8.75% (April), 9.75% (March), 10.75% (Feb), 11.25% (Jan) 12% (24%), 2019 actual GDP growth: 0.9% (versus expectations of 4.6%), 2020 forecast GDP growth: 4%, Leader: Recep Tayyip Erdogan (President). Overall: Last year was a tough one for Erdogan and there has been increasing chatter about opponents banding together to overthrow someone who has basically been in power since for nigh on twenty years. However, although he is facing tough times currently, he still has legions of fervent supporters and many others are becoming increasingly reluctant to criticise him in public for fear of reprisals. Call me cynical, but I think Erdogan will ramp up his military actions (and in doing so, agitate relations with the US) in an attempt to take some of the focus away from the ailing economy
• [UPDATE, January 19th: the central bank cut its interest rate for the fifth consecutive time in order to stimulate the economy. What’s weird here is that when inflation is high (Turkey’s inflation rate now stands at 11.9%), pretty much every other central bank would increase interest rates in order to encourage saving over spending. President Erdogan, however, believes that the opposite is the case – i.e. that high interest rates result in higher inflation – and what he says, goes! UPDATE, February 5th: President Erdogan has promised revenge on Syria following the death of eight Turkish soldiers and accused Russia (Syria’s most important ally) of turning a blind eye. Turkey’s relationship with Russia has been a tricky one given that they are on opposing sides in Syria, but they need Russia more than Russia needs Turkey, so they will probably sort things out. UPDATE, February 20th: Turkey has cut its interest rate for the sixth time in a row by 0.5% to 10.75% in a bid to stimulate the economy]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: President Erdogan has successfully consolidated his power and can pretty much do what he wants – but this is precisely what spooks potential foreign investors in his country. He continued to express his desire to keep interest rates down (famously calling them the “mother of all evil”), but eventually had to pull back on his stance following a dramatic plunge in the lira which resulted in the central bank eventually raising rates enough to stem the tide in September. He annoyed America by hanging onto an American pastor, accusing him of espionage, but then released him at around the same time as he alerted all and sundry to Saudi Arabia’s alleged butchering (and subsequent dissolving in acid) of a dissident journalist at the embassy in Istambul. Erdogan is clearly a wily old operator but it remains to be seen whether he will be able to stabilise the economy and position it for growth following the ongoing impact from August’s currency crisis. The economic slowdown and rising unemployment rate will prove to be challenging for him in the upcoming municipal elections in March The elections went badly for Erdogan as voters expressed their anger with the economic downturn that ensued after 2018’s currency crisis. Rising inflation, increasing unemployment and being responsible for a country in its first recession in ten years didn’t do much for his popularity. Other than that, Erdogan has continued to suppress his opponents but his increasingly nationalistic rhetoric and economic mismanagement is causing a rising tide of discontent (especially among younger voters). Whether or not this will ultimately come to anything is a moot point).
•  Russia – Population: 142m, Unemployment: 4.6% (4.8%), Interest Rate: 4.5% (June), 5.5% (April), 6% (Feb) 6.25% (7.75%), 2019 actual GDP growth: 1.7% (versus expectations of 1.8%), 2020 forecast GDP growth: 1.5%, Leader: Vladimir Putin (President). Overall: Vladimir Putin, in his fourth term as president of Russia, announced a major overhaul of Russian politics on 15th January 2020 – the biggest in ten years – in a rewrite of the constitution that would increase the power of parliament and decrease the power of the president. Hours after he made the announcement, his PM Dmitry Medvedev resigned along with the entire Russian cabinet to make way for the new changes. Putin has basically given himself a mechanism whereby he can continue to control the levers of power even after his presidency has ends in 2024. Given how fluid this situation is, it’s rather difficult to tell what’s going to happen in 2020 – so continue to watch this space for major updates!
• [UPDATE, January 21st: Russian president Putin approved a cabinet reshuffle by his new PM Mikhail Mishustin who is basically bringing his mates in as deputies. A slew of “national projects” is expected to be announced – in addition to measures increasing social spending on child welfare, public sector wages and free school lunches – to spark life back into the economy. UPDATE, February 6th: new PM Mikhail Mishustin has promised to bring in changes to the country’s 2020 budget to increase government spending by up to 10% in order to boost economic growth. UPDATE, February 27th: there is going to be a nationwide vote on March 10th on Vladimir Putin’s proposed changes to the constitution – which also give him a backdoor way of extending his rule. UPDATE, 27th March: Putin has now postponed a vote that was scheduled for April 22nd as he bowed to pressure to take the coronavirus outbreak more seriously. He said that he will be financing anti-coronavirus measures by taxing interest on bank accounts with more than around $13,000 in deposits. Apparently, over 55% of Russian bank deposits have more than that amount and a lot of them are for people who have built up a nest egg to ease their retirement and supplement a meagre state pension. UPDATE, April 14th: after saying that the virus was “under conrol” a few weeks ago, Putin is now saying that things are “changing for the worse” and Russians are facing more restrictions on movement (although he is still meeting people in person and shaking their hands!). There are increasing concerns that the virus is now spreading to the north and east of the country to more remote places who don’t have the resources to deal with it. UPDATE, May 6th: Putin is considering a lifting of lockdown conditions despite the number of cases rising but his handling of the whole thing has done his credibility a lot of damage. His approval ratings are now at their lowest level for 20 years.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Russia is in a tricky spot currently what with it suffering with problems stemming from ongoing international sanctions, weak investment both domestically and from abroad and an ageing population. Putin will, however, galvanise his people against the rest of the world and continue to keep a tight grip on the economy. He has used energy revenues to invest in social programmes and the military and has kept national debt at low levels but I don’t expect anything particularly stellar from Russia in 2019 (unless, of course, the oil price goes bananas for some reason Actually, things haven’t been great for Putin and Russia in 2019. Having won his fourth term as president in 2018 with a massive 76.7% of the vote, his popularity ratings have taken a bashing after hikes in consumption tax, changes to pension laws that made people work longer and the shrinkage of real incomes. Russians showed their discontent via a number of violent protests over the summer over government corruption and Putin’s United Russia party lost seats at September’s regional elections).

MIDDLE EAST AND AFRICA

•  Saudi Arabia – Population: 33m, Unemployment: 5.6% (6%), Interest Rate: 1% (March), 1.75% (March)  2.25% (3%), 2019 actual GDP growth: 0.5% (versus expectations of 2.0%), 2020 forecast GDP growth: 1.7%, Leader: King Salman bin Abdulaziz (King), but it’s really Crown Prince Mohammad bin Salman. Overall: As far as MbS’s subjects are concerned, he’s modernised the country by doing things like giving women more freedom and given retail investors a potentially valuable freebie in the form of an indirectly subsidised IPO (of Saudi Aramco) with guaranteed dividends to look forward to! He also continues to wield power in OPEC and may well complete his journey back to the international fold by supporting the West in actions against Iran
• [UPDATE, April 18th: Saudi Arabia has been doing some pretty interesting things of late. It shocked everyone by increasing oil production after an emergency meeting with Russia failed to them to cut production in order to put a floor under the oil price. Oil prices cratered as a result, went up for a bit when Russia came back to the negotiation table and then weakened again when observers came to the conclusion that the 10m barrels a day cut just wasn’t going to be enough given the huge amount of oil reserves that have been built up. US shale oil producers have either gone bust or are heading that way and many oil majors are cutting capex plans drastically. In the meantime, the Saudi sovereign wealth fund, the Public Investment Fund (aka the PIF) has been buying up various assets on the cheap – an 8.2% stake in Carnival, the cruise ship operator, stakes in various oil companies and, somewhat bizarrely, Newcastle United for £300m. Other Gulf sovereign wealth funds have been doing the same.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: The whole Jamal Khashoggi incident has put a spanner in the works for Crown Prince Muhammad bin Salman’s swift accession to the throne – although it will still happen when the dust has settled. Everyone was singing his praises as a reformer after his anti-corruption drive and as a forward-thinker in his bid to wean his country off reliance on oil revenues with high profile tech investments and other measures. His (“indirect”) melting of a hapless journalist in an acid bath hasn’t done much to endear him to others, but the fact remains that Saudi Arabia is a major force in both the region and the oil industry and the US in particular is keen to keep an ongoing cordial relationship with this key player in the Middle East. The kingdom recently announced an increase in spending over the course of 2019 to boost economic growth in the face of weaker oil prices. Still, when all’s said and done, the kingdom’s fortunes are still very much dependent on oil price movements and so clearly its economy will be happier at prices closer to $80 a barrel rather than $50 – hence the recent agreement for OPEC members (and non-members) to cut production I think that “MbS” has achieved a great deal this year bearing in mind the damage that the whole Khashoggi affair did to his public image (many people had this opinion anyway from previous incidents, but this particular one became much harder to deny). He even managed to defy the scepticism of international investors over the $2tn valuation of the state-owned oil company Saudi Aramco as the company listed at the top end of the valuation range and topped the $2tn mark on the second day of trading. OK – so he did this by calling in favours, but he achieved what he set out to do. This man is ruthless, as his sacked former energy minister Khalid al-Falih will attest.).
•  Iran – Population: 83m, Unemployment: 10.9% (12.1%), Interest Rate: 18% (18%), 2019 actual GDP growth: 1.8% (versus expectations of -3.4%), 2020 forecast GDP growth: -1.6%, Leader: Hassan Rouhani (President). Overall: These are tough times for Iran. Income from exporting oil has been (and will continue to be) decimated due to US sanctions – and the slashing of oil subsidies did not go down well. HOWEVER, I do wonder whether the US assassination of Soleimani has gifted Rouhani a useful boost as he can rally his people by switching up the anti-America/West rhetoric (there will be four national days of mourning for the now-deceased head of the Iranian Revolutionary Guards’ overseas forces). He has already said that “Americans did not realise what a great mistake they made and that they will pay for the consequences of this crime not only today but also in the years to come” and Iraq is now getting behind them given that the strike occurred on Iraqi soil at Baghdad airport. The situation is very fluid at the time of writing
• [UPDATE, January 19th: so just days after the Soleimani assassination, it turns out that Iran’s Revolutionary Guard accidentally shot down a Ukranian passenger plane. After initially denying it, not giving anyone access to the black box and doing a botch-job on the clear-up operation, Iran admitted to the mistake. This resulted in a massive turnaround in public sentiment that turned into anger towards Ayatollah Khamenei and President Rouhani as Iranians accused the state of lying to them. Celebrities and athletes put their support behind the protests as all sorts of concerts and events intended to mark the anniversary of the 1979 Islamist revolution were cancelled. Kimia Alizadeh, the 21 year-old Iranian taekwondo Olympic medalist, quit Iran to live in Holland. UPDATE, 27th February: problems continue as dissatisfaction increases over the regime’s clumsy attempts to contain the coronavirus given that it is now the country with the most coronavirus deaths outside China. UPDATE, 15th April: Iran had its biggest ever IPO today, selling 10% of Shasta, its state-run holding company (it’s the investment division of the country’s Social Security Organisation which is Iran’s biggest pension fund). It has stakes in all sorts of industries including petrochemicals, cement, shipping and finance. The IPO is part of an effort to raise funds for the government amid a turbulent economic backdrop made worse by the coronavirus. Speaking of which, there have not been any major lockdowns in the country, as it says that it can’t afford to pay people to stay at home. Instead, the country will be returning to normal life from next week. UPDATE, May 4th: Iran’s parliament just backed a move to knock four zeros off its currency, the rial, which has been decimated by fall in value due to US sanctions. The new currency will be called the toman and reforms will be implemented as soon as possible. Just to give you an idea of why they are doing this, at the moment one real = €0.000006!]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: President Rouhani faces tough challenges as American sanctions continue to bite. As you will recall, Trump pulled out of a multilateral agreement to lift sanctions in exchange for restrictions on its nuclear programme and promptly threatened anyone else who dealt with them. As a result, inflation has powered through the 30% level towards the end of 2018, food prices have increased by about 60% and Iran’s currency, the rial, has lost over half of its value since January last year. Unsurprisingly, its citizens aren’t happy with the situation and they turned out in the biggest anti-government protests for ten years last month. Oil makes up the majority of Iran’s exports, so sanctions have severely restricted the amount of money – and financial market access – available to the government to hand out to its increasingly frustrated people. The government is cracking down hard on financial fraud and bribery (even going as far as executing some of the culprits), but it seems to me that this is a mere distraction and is, in reality, too little too late as Iran has long been one of the most corrupt nations in the world. The lack of oil exports will continue to shake business confidence overall and the economy is likely to fall into recession 2019 was a tough year for Iran as US sanctions continue to cut deep. The regime has angered citizens by cutting petrol subsidies, which has hiked prices by a whopping 50% overnight (although it is still incredibly cheap when judged against other countries), although it promised to give 60m people out of the 82m population a monthly bonus to compensate for this price rise! Mind you, when you consider the fact that inflation has breached the 50% mark already during the course of 2019, you can understand Iranian citizens’ anger).
•  Nigeria – Population: 203m, Unemployment: 23.1% (23.1%), Interest Rate: 12.5% (May) 13.5% (14%), 2019 actual GDP growth: 2.28% (versus expectations of 1.9%), 2020 forecast GDP growth: 2%, Leader: Muhammadu Buhari (President). Overall: Buhari’s task is a tricky one when you consider that the sheer size of Nigeria’s population, which speaks around 500 languages and has more people living in “absolute poverty” (= on less than $1.90 a day) than India. His efforts to make Nigeria Africa’s most dynamic tech hub are starting to pay off (last November alone, its fintech companies attracted almost $400m of foreign investment!) and he has started to make some long-overdue reforms to the oil industry. Interestingly, on the subject of oil, a businessman called Aliko Dangote, is investing $12bn in a petrol refinery which would mean that Nigeria could refine its own oil rather than sell crude and buy back finished product! He is also looking to raise VAT by 50% to 7.5% and could even try to remove the petrol subsidy, which is a drag on the economy and benefits the middle classes the most. Supporters hope that his signing of AfCFTA (the African Continental Free Trade Area agreement) will help to boost economic growth in the whole continent
• [UPDATE, [UPDATE, January 19th:a new finance bill was passed this week (that will raise the country’s VAT rate from 5% to 7.5%) gives incentives to invest in Nigeria’s capital markets and exempts some small businesses from corporate income tax and lessens it for medium-sized ones. This is part of a general bid to broaden its income streams as the country still gets around 57% of its revenue and 94% of its foreign exchange from the oil industry. January 29th: President Buhari is getting more public about his efforts to crackdown on corruption, but his record thus far on this is patchy at best. Despite some recent success, Nigeria fell four places to 146 out of 180 countries on Transparency International’s annual corruption index. UPDATE, April 11th: Africa’s biggest crude oil producer is warning of of imminent recession (potentially the second one in five years) and has asked for $7bn in emergency funding due to oil revenues plummeting. It has also abandoned an oil subsidy scheme that was costing the government a lot of money to keep petrol prices artificially low.]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Elections are due in February and it looks likely that the incumbent leader of Africa’s most populous nation, Muhammadu Buhari, will win – although rumours have been circulating that he has been replaced by a double(!). The former general has been known to take many month-long trips abroad for medical treatment and so some have suggested that he actually died and has been replaced! Re the economy, Buhari has been dragging his feet on signing up to the African Continental Free Trade Area agreement which will remove tariffs on 90% of goods and could boost trading within the continent by a considerable margin, but momentum seems to be building.  Other than that, Nigeria’s economy remains highly geared towards the oil price and so its fortunes for 2019 will probably fluctuate accordingly. Signing up to AfCFTA might help them a bit, but oil is still the key. The State still has problems with corruption and the country’s ability to manufacture goods is still being held back by poor infrastructure and unreliable power generation, among other things. Buhari has tried also to clamp down on illegal imports by closing borders, but this isn’t expected to be particularly effective in the long run. He did sign up to AfCFTA over the summer which will remove 90% of intra-Africa tariffs, but it will be a good while yet before any of this kicks in).
•  South Africa – Population: 55m, Unemployment: 29.1% (27.5%), Interest Rate: 3.75% (May), 4.25 (April), 5.25% (March), 6.25% (Jan) 6.5% (6.75%), 2019 actual GDP growth: 0.1% (versus expectations of 1.8%), 2020 forecast GDP growth: 1.6%, Leader: Cyril Ramaphosa (President). Overall: Ramaphosa just has to sort out state-owned power monopoly, Eskom, as a matter of urgency given that it supplies virtually all of the country’s electricity. The company has had to impose some of its biggest ever rolling power blackouts to avert a collapse of the grid, causing disruption to many of South Africa’s key industries. There is no alternative power supplier and it has suffered from years of mismanagement and underinvestment, with creaky old power stations becoming less reliable and newer power generation plants suffering with design flaws. It has huge debts (about $30bn – which equates to about 9% of South Africa’s GDP!) and Ramaphosa is looking at splitting it into three: generation, transmission and distribution, breaking up its monopoly. That will clearly take time, but he will need to make swift progress otherwise unreliable electricity supply will scupper the economic growth that South Africa needs more than anything right now
• [UPDATE, January 19th: South Africa’s central bank announced a surprise 025% cut in its interest rate to bring it down to 6.25%. The bank last cut rates in July. UPDATE, January 21st: another state-owned nightmare is South African Airways – it has now started to suspend flights after delays on a state bailout. UPDATE, February 27th: the government has announced plans to cut back on its public sector wage bill as part of a desperate effort to reduce the biggest ever fiscal deficit in the post-apartheid era. Finance minister Tito Mboweni, outlined plans to cut civil servant pay over the next three years. Moody’s is looking to downgrade the country to junk status next month. Eskom and South African Airways continue to suck up state spending. Over a third of South Africa’s state spending goes on wages. UPDATE, March 4th: the country fell into recession for the second time in two years as the figures from Statistics South Africa proved to be even worse that the already pessimistic forecasts. Ramaphosa blamed power cuts, lack of business confidence and drought. UPDATE, March 24th: Ramaphosa ordered the closure of non-essential businesses and a countrywide lockdown from Thursday 26th at midnight in an effort to control the coronavirus. UPDATE, April 14th: The central bank (the South African Reserve Bank) surprised everyone by cutting its interest rates again by 1%, less than a month after it unveiled another 1% cut. The interest rate is now at its lowest level in the post-aparteid era. This just shows the level of concern over the economy, which was already looking pretty wobbly before the coronavirus hit. The rand has lost almost 20% of its value versus the US dollar so far this year as investors have been selling out of emerging markets and piling into safe havens]
• (WHAT I SAID AT THE BEGINNING OF 2019. How did I do? Updated comments from January 2020 made in red) Overall: Cyril Ramaphosa managed to replace the deeply dodgy Jacob Zuma as president in February last year and managed to drag South Africa out of recession in the third quarter as manufacturing, finance and trade managed to more than compensate for the drag of sluggish mining output. Having said that, Ramaphosa still has significant hurdles to overcome in the form of high unemployment among the black majority and lack of investment following years of Zuma’s mismanagement. He also has to find a solution to fixing poorly-performing state companies such as electricity company Eskom. Unfortunately, South Africa’s GDP has had a bit of a rollercoaster ride in 2019 as it contracted in the first quarter, rebounded in the second only to fall in the third quarter as Ramaphosa has been grappling unsuccessfully to get South Africa out of its current growth rut that it fell into under predecessor Jacob Zuma. The worrying thing is that third quarter contraction was due to poor performance in major sectors such as mining, farming and manufacturing. Business confidence has been damaged by troubled state companies (such as Eskom and South African Airways), squabbles in the governing ANC party and rising government debt).

Here we are again! This year, I thought I’d highlight four different areas which I think will be worth watching this year for interesting developments. Many of them are carried over from last year, but I really think that 2020 will be a year of evolution rather than revolution in many ways. Here are the areas:

1. Telecoms, Media and Tech (aka “TMT”) – where 5G will be rolled out more widely and content will be richer, which is likely to make more people want to buy new mobile phones
2. Finance – where Libra’s rollercoaster 2019 could lead to more transparent payments systems
3. Consumer – the alternative protein movement will continue to grow (although meat could make a comeback) and cannabis-fever could return – all in less packaging
4. Cars – where more consolidation and joint ventures are likely on both a regional and technological basis

So…

…in TMT, 5G rollout will continue around the world after a patchy 2019. Carriers will continue to tout the benefits of 5G as being a faster and more reliable service for video streaming, gaming and virtual reality and governments around the world are keen to accelerate developments in a bid to be at the tech forefront. 5G will enable smart cities and roads, autonomous cars and factories due to its faster speeds but governments have had to balance the need to raise money via selling off spectrum (the airwaves used to carry all the mobile phone and other electromagnetic signals) with not making it prohibitively expensive (and potentially crippling) for the carriers bidding for it at auction, otherwise they won’t have enough money to roll services out very quickly. According to Livewire.com, 5G is already at least partially rolled out in the US, Canada, China, Qatar, Kuwait, Saudi Arabia, Bahrain, the UK, Italy, Switzerland (with >90% of the population now covered), Spain, Finland, Ireland, Romania, Poland, Australia and New Zealand. Monaco now has full coverage! Countries that will be making official rollouts over 2020 include Mexico, Brazil, Colombia, Japan, India, Vietnam, Iran, Singapore, Malaysia, Nigeria, Norway, Germany, Czech Republic, Sweden, France and the Netherlands. This is obviously a moving feast but is correct at the time of publishing to the best of my knowledge. [UPDATE, January 20th: Vietnam’s biggest telecoms company, Viettel (which is owned by the country’d Ministry of Defence), announced plans to launch commercial 5G services this year, using 5G tech it has developed itself. It expects to rollout the tech from June this year] I believe that the ongoing rollout will give people cause to think about changing their phones and that this will be the catalyst that will lead to a major uptick in handset sales. Bendy phones from Huawei (the Mate X) and Samsung (the Galaxy Fold) had teething problems last year, but I think if you combine 5G-enabled handsets and bendy phones with massive screens, you have a potential winner – as long as you don’t make the product too expensive (those first ones were around $2,000 a piece – so not for everyone!). If game streaming continues to evolve in the meantime in terms of reliability and depth of content, it will be harder to resist the temptation to upgrade whereas I think certainly for the last few years, each new phone seemed to be only a slightly better iteration of its predecessor giving users little incentive to change. Mind you, even if bendy phones don’t take off because they’re too expensive, I would have thought that most people will still want to upgrade to 5G. Talking of content (and the “M” of TMT), I think that game streaming will gather momentum as internet speeds increase and services like Google Stadia, Sony’s PlayStation Now and Microsoft’s soon-to-be-launched streaming service, xCloud, get more popular. If game streaming takes off, the potential market is huge when you consider that, currently, there are estimated to be 200-250m console players globally across all the consoles versus 2.5bn people who play games across all platforms. Game streaming could reach markets that have been difficult thus far for console makers (e.g. India), but obviously these places are going to need the internet speeds required to make the experience an attractive one. Having said that, I don’t think that consoles will be dead quite yet – after all, Sony is going to be bringing out the PS5 and Microsoft the XBox Series X later in 2020 – but I do think that this could be the final generation of stand-alone machines. Exciting times ahead, but it’s early days at the moment! Staying with content, I think that consumers could be winners in TV and video streaming as Netflix has to contend with more competitors in the form of Disney+, Apple TV and the like – and they’ll all be building up customer bases by offering attractive “introductory” rates. I think that this year will be great because consumers will probably experiment and perhaps move around a bit to see what’s on in terms of content for each, but the real bun fight will happen when everyone goes to “full price”. That is the time that I think individuals will reach “subscription fatigue” and start cutting back – but I guess this will also depend on how consumers are feeling at the time re how their respective economies are doing. If things are going down the tube, unemployment is rising and household finances are getting tight, subscriptions to things like this will be highly vulnerable IMO because they will be seen as unnecessary luxuries (people may just cut down to one or two services, for instance) [UPDATE, February 20th: cord-cutting accelerates in the US with figures showing cable and satellite TV companies losing subscribers. UPDATE, February 18th: In the UK, BT has decided to to scrap its traditional pay-TV packages and let customers pay for prime content (e.g. Premier League football) on a monthly subscription – like the competition. UPDATE, February 26th: music streaming continues to gain momentum as the latest report from the Recording Industry Association of America (RIAA) says that US recorded music sales increased by 13% last year. Streamers such as Spotify and Apple accounted for 80% of revenues last year in the US and they are now gaining ground on those at the peak of 1999, when CD sales represented 90% of overall revenues. UPDATE, March 3rd: short-form video streamer Quibi, which specialises in video series that run for ten minutes or less per installment, has just completed a second round of financing worth $750m. This is in addition to the $1bn it has already raised one month before the product’s launch. This is interesting because it is new and different from all the rest! It will launch with over 50 shows and charge subscribers between $4.99 and $7.99 per month for access. UPDATE, March 29th: the launch of this service is due on April 6th, but the FT’s Lex thinks that its timing may not be ideal as it launches with content for people on-the-go in mind at a time when people have got loads of time on their hands! It also questions its pricing versus all the other offerings. UPDATE, March 22nd: in addition to music and TV/film streaming, fitness streaming and education-related streaming have been doing well because of people being confined to their homes and needing entertainment. UPDATE, April 3rd: Chinese apps such as Lizhi (podcasts), Douyin (China’s TikTok), Bilibili (like YouTube) and others have been doing very well from increasingly engaged online audiences. Gaming firms, content streamers also continue to benefit from the current situation. UPDATE, April 18th: I’ve actually had a go with Quibi, but found it quite frustrating. From what I’ve seen, the reviews have been pretty damning so far and I would agree with the view that it launched at the wrong time. Given that its format relies on busy people wanting to watch 10 minute episodes, the fact that many people have more time on their hands during lockdown just makes it all look a bit redundant. Still, loads of money has been thrown at it so there is an argument that it may prove to be too big to fail]. I also think that 5G will have a part to play in growing momentum in a more meaningful way for the Internet of Things. Apple, Amazon and Google agreed to collaborate with each other and members of the Zigbee Alliance (comprising of members including Samsung, Ikea and Comcast) at the end of last year to build a common standard so that devices could be operated by any voice assistant. I think that this will be a major boost to the prospects for smart homes and the Internet of Things where devices are able to talk to each other – and 5G will be able to make this all work better because there will be more capacity for more devices to all be running at the same time. On current projections, the market for smart devices is expected to grow by about 14.4% per year, according to the International Data Corporation, but I wonder whether this really will open the floodgates as all the major players will be on one standard with faster 5G connections.

…in finance, I think it would be fair to say that Libra had a rollercoaster of a year 😂 (or half-year, as it was officially launched in May/June 2019!). Things seemed simple enough at first in that Facebook said it wanted to create a new form of money, backed by a basket of “proper” currencies (including the US Dollar, the Yen and the Euro) and based on blockchain technology, making it a “stablecoin”. It said it wanted to reach the “unbanked” of the world and make money transfers much cheaper, quicker and more transparent. It brought in 27 other companies initially to form the “Libra Association” that would oversea the currency from Geneva in an effort to deflect potential criticism that the whole thing was run just by Facebook, but seven (mostly payments companies such as Visa and Mastercard) companies pulled out before the first meeting of the Association before its first meeting in the middle of October [UPDATE, January 22nd: Vodafone pulled out of the Libra Association to concentrate efforts on its own payments system M-Pesa, but didn’t rule out future co-operation]. It was roundly criticised by central bankers and politicians alike, with US Fed Chairman Jerome Powell saying he had “serious concerns regarding privacy, money laundering, consumer protection and financial stability”, US Treasury Secretary Steven Mnuchin said “I hate everything about this”, President Trump tweeted that Libra “will have little standing or dependability” and France’s economic minister Bruno Le Maire described it as “a threat to national sovereignty”. Even Zuckerberg himself told Congress that “I don’t actually know if Libra’s gonna work”. Having said all this, the remaining 21 members still hope to launch Libra this year – but even if they don’t, Libra will have sparked conversations around the world about cryptocurrencies and money transfers. According to McKinsey, $10tn per annum is transferred across borders by consumers and small businesses, but the charges are huge (the World Bank estimated that for every £500 transferred, almost £35 would have to be paid in fees). This year, the EU’s Cross-Border Payments Regulations will come into force, making sure that customers get full transparency about what costs they are paying up front but I would have thought that all the Libra drama would have thrown additional fuel on the fire regarding money transfers. This should be a positive development for the consumer as costs are more likely to come down! Regarding Libra itself, it could still be salvageable if it rebrands itself as a payments system and potentially integrates itself with current payment providers like PayPal or Stripe and with other digital currencies, but we’ll just have to see what happens. [UPDATE, April 17th: Libra announced plans for “Libra 2.0” that reined in its original big ambitions and it will now basically be another PayPal. It has abandoned a peg to a basket of international currencies and will now offer digital versions of traditional major currencies instead. It has also ditched ambitions to be a “permissionless” system whereby anyone could run the network without oversight and it has also promised to take responsibility to vet any wallet that is launched on the network (previously, it had said that it would leave this to local regulators].

…in consumer – meat-alternative companies such as Impossible Foods and Beyond Meat have generated a great deal of hype over the last year in terms of attracting huge funding and executing highly successful IPOs respectively, as well as signing major distribution deals with restaurant chains such as Burger King and KFC. Fear of more competitors in the form of other start-ups as well as established meat producers (e.g. Tyson Foods, Maple Leaf, Nestlé and Unilever etc.) took some of the shine off the initial euphoria, but I still think that the meat-alternatives market has a way to go yet. Meat alternatives got a useful boost in terms of sky-rocketing pork prices (because of the outbreak of African Swine Fever leading to China having to cull around half of their pig population to eradicate the highly-infectious disease – which also led to higher prices for beef and poultry because pork was being substituted) but meat-eaters are unlikely to convert overnight. According to the Good Food Institute, the US meat market in 2018-19 was worth about $74bn versus plant-based meat substitutes sales of about $800m, so there is still a way to go yet for plant-based proteins. Still, it is a rising trend and although meat-eaters are unlikely to turn vegan overnight, it’s not outside the realms of possibility for people to just eat a bit less of it. [UPDATE, Jan 11th: Meat alternatives continue to see strong demand as evidenced by the success of Selfridge’s vegan hampers, the size of McDonald’s demand for vegan burgers (which scared off Impossible Foods, leaving Beyond Foods as the main one in the running). Channel 4 documentary “Apocalypse cow: how meat killed the planet” ruffles a lot of feathers. UPDATE, Feb 14th: Nestlé this week announced that its plant-based alternative protein business – which is only a tiny part of the overall business – achieved double-digit organic sales growth via brands such as Garden Gourmet. It also announced the launch of a plant-based “tuna salad” – impressive because seafood alternatives have lagged those of their “meat” cousins UPDATE, Feb 25th: Cargill indicated that it is planning an April launch of meatless patties and other non-meat minced products made from soya and plant-based proteins. The competition is hotting up! UPDATE, March 3rd: Impossible Foods announced that it would be cutting its wholesale prices by 15%. Given the intensifying competition from food giants, this is a necessary move IMO] On the meat side of things, methane emissions from livestock are blamed for causing environmental damage (according to the UN Intergovernmental Panel on Climate Change, livestock, land and their energy use accounts for about 10% of total global carbon emissions!), but some companies are now looking to reduce that. For instance, an American company called Australis Aquaculture is currently working on a compound from seaweed that disrupts the methane production process in cows to the extent that it apparently reduces methane by 80%! US-based Symbrosia and Elm Innovations are also producing seaweed-based feed that reduces methane emissions, but an international project called RuminOmics is going a step further by looking into breeding cattle that produce less methane! New Zealand scientists are also working on an anti-methane vaccine, which they hope to have commercially available within five years. In the meantime, Dutch multinational DSM thinks it’ll get commercial registration to roll out a feed additive this year called 3-NOP that stops the cows’ methane-causing enzyme from working. [UPDATE, January 11th: the ongoing change in the global market for meat since the African swine fever outbreak continues. So far the culling of pigs affected by the disease has reduced their number in China by about 40% (around 100 million 😱), leading to pork prices shooting up to record highs and prices of beef and chicken going higher as consumers ate them instead. Brazilian, European and Australian producers have been diverting a lot of their product to China meaning that other markets such as Japan, Indonesia, Canada and the Philippines have lost out. Swine fever has now spread to Vietnam, the Philippines, South Korea and Mongolia with recent outbreaks in Serbia and Slovakia] Elsewhere, I also believe that cannabis could make a comeback in 2020. Initial exuberance followed the legalisation of cannabis in Canada in October 2018 and there was a lot of consolidation within the industry as companies wanted to come up with their own cannabis-infused (or, more accurately, CBD-infused) products that would, they hoped, fly off the shelves because of the novelty and their purported health benefits (crudely speaking, cannabis has a “nasty” element – called THC – and a “good” element that bring a range of health benefits – called CBD). However, approval for new products and their sale has been quite slow, bursting the bubble of excitement somewhat and leading to the poor share price performance of companies such as Canopy Growth and Cronos Group. I am of the opinion that once there is wider approval of products for sale, it is feasible that younger people who are being targeted for vaping could be ripe for focused marketing of CBD, potentially resulting in the proliferation of CBD-infused drinks and confectionery (among many other products). 2019 was slow – but I think that 2020 could be the year that things pick up again. And if they do, there’s a new Exchange Traded Fund (ETF) called the Medical Cannabis and Wellness Fund from Canadian fund Purpose Investments, which launches on January 13th and will be the first opportunity that European investors will get to invest in the legal marijuana industry! Fun fact – the Church of England cut medicinal marijuana from its list of things it can’t invest in, following its legalisation in the UK in October 2018. Another “consumer” trend I think we’ll see this year is less plastic packaging. Loop is an example of a company which is trying to cut out waste by working with well-known brands such as Häagen-Dazs, Dove and Crest to make their packaging reusable. This means that a customer sends off packaging in a special bag and they sent back with refills and it’s currently being trialed in Paris and across the US. This start-up is currently working with companies like Nestlé, Unilever P&G and PepsiCo to reduce the amount of plastic packaging used in everyday products. About 25% of annual plastic production globally goes into packaging, according to Plastics Europe and the Ellen MacArthur Foundation, making it is the biggest use of plastic – bigger even than use in buildings, textiles or transportation. Customers are getting increasingly conscious of this and so I believe that more will be done by the food producers themselves and supermarkets as time goes on – and I think we will see more supermarkets offering to sell goods using shoppers’ own containers. Although we might not see huge strides on this in 2020, I believe that we will be going in this direction. [UPDATE, January 19th: Asda has joined rivals including M&S, Tesco’s and Sainsbury’s in launching a low-plastic “sustainable store” in Leeds that will allow customers to refill their own containers with things like coffee, rice, pasta, breakfast cereals and other items. It will also get rid of plastic packaging from mushrooms, cucumber and flowers. Separately, Nestlé announced it would be committing £1.6bn to replace plastic packaging with something more sustainable. UPDATE, February 25th: glassmakers are seeing an opportunity to regain ground that has been taken by plastics as a sustainable option. Arglass Yamamura is building a $123m facility in Georgia and is the US’s first new glass container factory in 12 years. Interestingly, glass is the only common packaging material that the FDA classifies as “generally recognised as safe” and makers are making concerted efforts to make it more recyclable]  

…in cars, I think that the consolidation we have been seeing in 2019 will continue in 2020 as manufacturers will still need to huddle together to reduce costs, pool R&D resources and concentrate on specific geographies. They need to do this in order to comply with ever-tightening emissions regulations, to meet requirements of having a certain percentage of their model line-up electrified and to protect themselves against sluggish sales on a global basis. When you consider that manufacturers are talking more and more about how vehicle ownership will change and the potential impact (when it does eventually get here) of driverless cars, you can see why they are rushing to stay ahead of the curve. Tesla is making the sensible move of attaching itself to China via production in its gigafactory in Shanghai but I really believe that the traditional car manufacturers such as VW, Ford, etc. are now catching up with Tesla in terms of technology and overall offering and will, in my opinion, eclipse them with their superior production facilities, supply chains and distribution channels. The electric cars due into the market this year look pretty exciting (have a look at VW’s ID.3, the Mini Electric, the Polestar 2 or – if you have a few extra quid knocking around – the £2m Lotus Evija) and show that customers are continuing to get more options to choose from – and ordering a new windscreen won’t take months (unlike some instances with Tesla). You will no doubt think that I am mad, but I think that Tesla needs to be taken over or go into a proper joint venture with a traditional manufacturer. Yes, Elon Musk has a massive ego, but he also has a piddly model line-up, massive cash burn and patchy production. IMO he could do with getting together with someone a bit more grounded and access to the capabilities that an established manufacturer can offer. [UPDATE, January 21st: Subaru whinged about poor EV sales in America, with the company’s chief exec complaining that “the only EVs that are selling well are from Tesla”. It seems that early adopters are also very patriotic! The US accounts for 2/3 of its global sales, so it’s obviously a pain for the company UPDATE, April 4th: (from me) the car market continues to suffer. Continental, one of the largest car parts makers in the world, has basically said its profit margins will be zero and trouble at Auto Trader points to problems in the secondhand car market. I think this was already a ticking timebomb as people continue to buy on PCP and I believe that the market is shortly going to be flooded with product as PCP buyers hand their cars back at the end of their agreement and people who’ve lost their jobs sell their car to raise money].

PLEASE SEE BELOW WHAT I WROTE LAST YEAR (UPDATED ANNOTATIONS/THOUGHTS ARE IN RED):

For this year’s the 2018/19 edition of Watson’s Yearly, I thought I’d take a look at seven areas that I believe could see some interesting developments this year. Here they are:

1. Telephony/Tech – 5G, mobile gaming and bendy phones
2. Cars – autonomous and Electric Vehicles (EVs)
3. Finance – the continued rise of Monzo and Revolut as well as cashless payment
4. Retail – AI’s increasing role and the example of US department stores
5. Food – veganism
6. Cannabis – continued highs
7. Cord-cutting – developments in streaming

So…

In TELEPHONY/TECH, hype over the next generation wireless standard of 5G is likely to intensify – especially at the imminent Consumer Electronics Show and the Mobile World Congress with Samsung, Huawei, Xiaomi and Oppo all expected to be launching 5G phones this year. However, on a practical basis, a real rollout is going to take time. According to the UK government’s current 5G strategy and network operators, we won’t be seeing the rollout of the superfast 5G network until later on this year or 2020 but it’s likely that it won’t become widespread until at least 2022 although EE is making bullish noises about an earlier rollout. Dial down the 5G hype (Wall Street Journal, Dan Gallagher) says that over in the US, both AT&T and Verizon are rolling out services that are branded as 5G but consensus suggests that wide-scale availability of 5G will take much longer. 5G is going to be quite exciting as it will be quite a lot faster than 4G and will thus open up all sorts of other possibilities. Crudely speaking, 1G started in the 80s with voice, 2G came in the 90s bringing in text and picture messages, 3G in the noughties introduced the start of video calling and mobile data and then ten years later came 4G which supports mobile internet and higher speeds for activities like video streaming and gaming. 5G will be much faster (some say up to 100 times faster than 4G), has lower latency (which means there will be less lag – which could prove to be particularly useful for driverless cars), and greater capacity, meaning that networks will be able to deal with many high-demand applications simultaneously – which will be useful for connected cars and IoT (Internet of Things) devices as well as virtual reality experiences and simultaneous HD video streaming. There are some pretty interesting implications for the gaming industry as well as faster upload speeds could render future generations of games consoles obsolete (although Sony‘s CEO Kenichiro Yoshida reiterated the company’s commitment to the PS4’s successor last month) as gamers play on the cloud without the need for a “console middleman” – but all of that is quite a way off into the future. However, if you are interested in that sort of thing, have a look at Does cloud computing mean game over for Xbox and PlayStation? (Financial Times, Leo Lewis). I think that this was pretty accurate and the theme will continue to run in 2020 and beyond (as per the section above).

Actually, on the subject of GAMING, mobile gaming will continue to increase in popularity with PlayerUnknown’s Battlegrounds and Fortnite being prime examples of AAA mobile games making the transition to iOS and Android, according to Gaming prepares to level up (Wired). Mobile gaming revenues currently account for over 50% of the global games market and there is an increasing trend of premium pay-up-front games in addition to the more usual free-to-play offerings. In terms of specific games, however, Niantic (which was the company behind the wildly successful Pokemon Go) is expected to release an augmented reality game this year called Harry Potter: Wizards Unite which sounds like it will be a massive hit – but there will also be more uses of AR in stuff you use every day, according to Tech that will change your life in 2019 (Wall Street Journal, Joanna Stern and David Pierce). For instance, you could come up from the Underground, point your camera at the street and let a Google Maps digital arrow show you which way to go (that would be great in London, I think, as street signs seem to be quite difficult to spot a lot of the time!) and the tech will also be used increasingly in the field of training and simulation. Well it seems to me that we still aren’t there yet when it comes to taking more advantage of AR technology and my impression is that the Harry Potter game is nowhere near as successful as Pokémon Go was – despite the potential! Still, online gaming and e-sports continued to grow in popularity, with a pretty amazing historic highlight being the DJ Marshmello concert held within the Fortnite game back in February. This shows what is possible online and I think is a sign of the future as over ten million gamers gave their thumbs a rest and “attended” a concert at Pleasant Park. China’s Tencent has been supreme in the field of mobile gaming, but it has been held back by the authorities in 2018 since March – like many other games publishers – because of authorities’ belief that violent content and gaming “addiction” is having a negative impact on young people. However, Beijing boosts video game sector with licensing resumption (Financial Times, Tom Hancock) shows that China’s top media regulator has just relented with the approval of 80 new titles, but there is still a huge backlog. Still, it’s a step towards normality for the world’s biggest games market.

I think that BENDY PHONES could be the most exciting thing to happen in mobile handsets for years – and may even have the potential to break the ever-lengthening phone replacement cycle as a lot of phones have become much of a muchness these days in design terms. Given that phones have actually got bigger over time as user preference has evolved for larger screens, tech has now advanced to the extent that foldable phones that start off “phone-sized” and then open out into something “tablet-sized” are being developed by the likes of Samsung, amongst others (have a look at Smartphone makers seek foldable phones with flex appeal (Wall Street Journal, Dan Strumpf) for more details on this). I think that this could be a massive deal – and I am really looking forward to the first “proper” mobile phone company coming out with one of these. The mobile phone market is crying out for something new IMHO – and this could be it! I continue to believe that this will be an important technological development but although 2019’s offerings from Huawei and Samsung amazed in terms of conception, they lacked in execution due to technical teething troubles.

In CARS, I think that traditional petrol/diesel powered car will have a tricky time of it over the course of 2019 with tighter emissions regulations continuing to impact costs and a general loss of buyer confidence leading to slower sales. You can say that again! On the other hand, there will continue to be developments in autonomous cars (Waymo will continue to power ahead – well actually, Waymo surprised a lot of people when it said that it won’t be making cars from scratch and that it would be sharing its proprietary self-driving data set to all in a bid to accelerate the development of driverless technology – and Uber has just started testing again after that fatality earlier this year) and an increase in take-up of electric vehicles. Tesla will have more competition from the established carmakers as they roll out their EVs – Jaguar‘s I-pace, Audi‘s e-tron, Mercedes-Benz‘s EQ, Porsche‘s Taycan and Volvo‘s XC40 EV offerings are all examples of cars that will be making their debut. They have indeed been released but I wouldn’t say that the sales have been anything to particularly write home about on an absolute basis – yes, the percentage increase has been impressive but it has all been from a very low base Improving driving ranges and better charging infrastructures – as well as more appealing car offerings – will help to boost sales, albeit from a very low base. The internal combustion engine isn’t dead yet, but I think that survival in its current form will be measured in years, not decades. 2019 will be a year of evolution – not revolution – in automobiles.

In FINANCE, I think that 2019 will bring more cheer to the likes of Monzo and Revolut and see further advance towards a cashless society. Both challenger banks started small with limited services (Monzo with its pink payment card and Revolut with its initial focus on travel money and overseas transfers), but have been able to expand with continued inward investment. London-based Revolut was valued at $1.7bn in its most recent funding round and managed to secure a European banking licence from authorities in Lithuania last month that will allow it to offer current accounts and loans across the EU in the very near future. It is still preparing to apply for a separate banking licence to offer full banking services in the UK, but the speed of this will depend largely on how Brexit goes. I believe that both banks have advantage over the incumbents because they are more flexible in their development, have no baggage and can provide their customers with what they want (although perhaps cryptocurrency trading is not so attractive at the moment!). IMHO, it is highly likely that they will be bought by a bigger bank looking to get a bit of spark. These banks have done quite well this year although Revolut suffered for a bit because of allegations of dodgy Russia connections, but then it ended the year looking to raise $1.5bn to expand worldwide following the earlier announcement of a partnership with payments company Visa to open in 24 new countries. Monzo increased staff numbers and started to offer loans. Clearly they are doing something right as RBS opened its “rival” digital offering, called Bó, towards the end of 2019

I think that cashless payments will continue to advance in 2019 as waving cards and mobile phones for payment increasingly becomes the norm. Two Chinese systems are likely to continue to expand – Alibaba’s Alipay, a smartphone-based system (I say Alibaba – but it’s ownership structure is a bit more complicated, so it’s actually owned by Alibaba’s financial affiliate Ant Financial, which was most recently valued more highly than Goldman Sachs at $150bn) and WeChat Pay run by Alibaba’s nemesis Tencent. That they are both massive in China is a given, but they have their respective hearts set on overseas expansion, starting with Chinese tourists. However, they are both buying up stakes in other payments companies across Asia – Alipay has chunks of India’s Paytm, ePaisa in Pakistan and Dana in Indonesia. WeChat Pay is also doing something similar. Both systems use QR codes and are very easy to use. I must say that I wouldn’t be particularly keen on using Chinese systems myself as I would be concerned about how they use my data – but the idea itself sounds good. Payment came up rather dramatically in 2019 in the form of Facebook’s Libra. It suffered a huge amount of criticism and scepticism, but I think that cheap and rapid payments aren’t going away, so everyone will be scrambling to offer something in this regard – even if it’s not Facebook

In RETAIL, I think that AI will continue to develop and enhance customer experience both in terms of offering more of what we want as well as giving us more convenience. Virtual assistants will continue to develop and become more prevalent – ASOS has Enki the “fashion bot”, for instance, which is an algorithm that analyses shopper preferences and makes recommendations based on this data. One thing that I think will need to happen this year quite urgently is that someone needs to sort out our ailing department stores. Debenhams is teetering on the brink and Sports Direct‘s Mike Ashley is already busy with House of Fraser. Whether Ashley or someone else manages to buy Debenhams for a song (let’s face it, I think an independent turnaround is highly unlikely – especially if the current slowdown in consumer spending continues), a root-and-branch change is needed for them to survive long term. I think that whoever is up for the challenge should have a look at what is happening  across the pond in Michelle Gass is cracking the code at Kohl’s (Fortune, Phil Wahba). Even though the economic backdrop in the US is not as dire as it is over here, I think that there are many lessons that can be learned. Kohl‘s is concentrating on enhancing the customer experience by helping them get the best prices, having a laser focus on inventory accuracy that means they stock stuff customers want and make efforts to reduce queuing by using things like handheld checkout devices. The other interesting thing that they have done is sign an agreement with Amazon to take care of returns We had something similar in the UK with Amazon signing up with Next to do something similar. Amazon also has a concession in-store selling smart-home tech (such as Amazon Echo devices) which doesn’t compete with anything Kohl‘s has to offer. This means that Kohl‘s increases store traffic with people bringing in products that they want to return to Amazon, increasing the chances of them buying something from Kohl‘s while they are there. This melding of convenience and experience enhancement is something that is both achievable and vital for survival in my opinion. Let’s hope something positive is done to help the department stores before their spiral into terminal decline accelerates any further! Many department stores worldwide are continuing to have problems, although there are exceptions to the rule (Paris is due to reopen Le Samaritaine in April 2020, for instance). Mike Ashley has been moaning about his purchase of House of Fraser and Debenhams got a stay of execution but I think it’s going to die anyway. Survival will depend on a combination of identifying and focusing on the core customer, providing a great customer experience and blending offline charm with online flexibility.

In FOOD, I thought I’d talk a bit about the trend in alternatives to traditional meat. The year of the vegan (The World in 2019, John Parker) highlights a rise in people going vegan or vegetarian, especially among millennials – and the provision of vegan meals has started to become much more widespread. McDonald’s has started selling McVegan burgers, sales of vegan foods in America in the year to June 2018 rose 10 times quicker than overall food sales and even big meat companies – such as Tyson Foods – are buying stakes (not steaks 😜) in meat-free start-ups! America’s second largest school district, Los Angeles, will be dishing up vegan meals in all its schools in the 2018-2019 academic year and even the American Medical Association recommended more of these types of meals should be provided in hospitals. In terms of taste, Plant-based ‘meat’ and ‘fish’ may be the future. But how do they taste? (Wall Street Journal, Alison Roman) we see a taste test involving Beyond Meat‘s Beyond Sausage (which consists of pea, fava and rice protein in an algae-derived casing), New Wave Foods‘ Shrimp (which contains algae extract, micro algae and other plant-based protein) and Impossible Meat‘s The Impossible Burger (which is made from wheat, soy and potato protein). I even did a taste test of Beyond Meat‘s Beyond Burger in November (you can watch the video here) and was mightily impressed – and I’m very much a meat-eater! Basically, the general trend is such that the taste is getting very close indeed to real meat – so much so that it is being marketed to meat-eaters and non-meat eaters alike. Having the ability to “convert” meat eaters is getting everybody excited – and Beyond Meat has even gone as far as applying for a $100m listing on the NASDAQ according to Vegan food groups: lean, green, growth machines (Financial Times, Lex). Beyond Meat is probably at a more advanced stage than Impossible Foods, but I sense an onslaught coming. The fact that farmers are getting antsy about calling alternatives “milk” and “meat” shows just how scared they are getting about something that could have seismic consequences on the meat and dairy industry on a global scale. I can’t personally vouch for the other offerings, but I was astounded by the Beyond Meat Burger. The fact that it was even a bit pink in the middle (beetroot, apparently) did my head in. I think that 2019 really put meat-alternatives on the map. 2020 will see further development and distribution in my opinion.

In CANNABIS, I think that there was an awful lot of hype in the run-up to October when Canada became the second country in the world to legalise marijuana after Uruguay. There was industry consolidation in 2018 what with Aurora Cannabis‘ takeover of CanniMed Therapeutics finalising at the beginning of the year and its subsequent purchase of MedReleaf. Then there were some big cross-industry investments with Constellation Brands (a beer, wines and spirits producer) buying a big slug of Canopy Growth Corporation, Altria (tobacco giant) investing $1.9bn in Cronos and mega-brewer AB InBev working with Tilray on developing non-alcoholic drinks containing the active ingredients of cannabis, THC and CBD. Pulses started to race when rumours surfaced of Coca-Cola holding talks with Aurora Cannabis about developing cannabis-infused beverages, but these were dismissed by both parties. However, this mix of investment and M&A is bound to continue as companies and industries with mature products (especially those in cigarettes and alcohol) and deep pockets look out for the Next Big Thing, so I suspect that there will be lots of speculative activity in the shares to come in 2019. I’m not so sure that there will be any actual new beverages coming to market this year, but I could be wrong. If you want to know more about what sort of beverages could be developed, however, you should have a look at Not Everybody must get stoned: pot’s nonintoxicating future (Wall Street Journal, Amanda Chicago Lewis) which gives you the lowdown. Still, Marijuana is more dangerous than you think (Wall Street Journal, Alex Berenson) paints a rather darker picture of the consequences of overindulging on weed that include psychosis, increased incidence of mental illness and violence. Cannabis had a pretty miserable year, but I think that things will pick up again in 2020 as the hype has now died down

In CORD-CUTTING, I believe that the trend of people moving away from traditional cable and satellite TV providers and on to streamers such as Netflix and Amazon Prime will continue. Disney is to launch its own streaming service and AT&T will also be launching with programming from HBO and other sources following its purchase of Time Warner. Interestingly, Disney, Comcast to account for nearly 40% of spending on US programming (Wall Street Journal, Erich Swartzel) cites a report by Ampere Analysis which reminds us that two content juggernauts have been created in the M&A frenzy of last year – Disney bought Fox‘s film and TV divisions for $71bn and Comcast bought pay-TV operator Sky – that will account for 40% of all programme spending in the US and 20% globally. I still think that Netflix will power on despite these new developments because they already have what seems to be a largely happy (and growing) user base and – more importantly – a shedload of data on viewing habits that the others just don’t have. This information can be used to make better and more appealing programming from the off, which will ultimately mean less wastage in terms of spending. Having said that, I also think that there will come a point in the next few years when customers reach “subscription fatigue” – there are only so many subscriptions you can have before you end up paying what you used to pay for a traditional bundled service. When that happens, content will be king and we may see a reversion to surviving cable and satellite providers being the portals and Netflix and others providing proprietary content. However, that’ll be a few years away – but for 2019, I think that customers will be spoilt for choice! This has indeed happened and I think that consumers of TV streamers will be the big winners this year as the new channels try to attract more users with attractive low prices. Netflix saw subscriber adds wobble as the new entrants made themselves known.

2019 was full of US/China trade drama and Brexit chat which ended in Trump getting a “Phase One” deal and Boris Johnson claiming a historic win for the Conservatives in the UK general election. I suspect both of these subjects will loom large during the course of 2020 as more details are hammered out. It will also be interesting to see what sort of repercussions will follow the assassination of revered Iranian commander Qassem Soleimani as many observers fear that Trump has stirred up a hornet’s nest with his actions. 2020 will, of course, be even more of a test for Donald Trump as he seeks re-election toward the end of the year, so he will try to minimise impeachment chat, try to solve the China problem and get Iran to play ball.

I hope you have a fantastic 2020!

All the best

Peter Watson

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