What they do not realize, however, is the ramshackle state of the dining room, of the whole castle really. The abundancy of fine foods and wonderful wines has made them complacent and comfortable. Only when the table is cleared they will find out that it is completely rotten. Its legs are bending, the many cracks and fissures show that it is near collapsing. By remaining seated, the guests only postpone the inevitable.

This scene exactly describes the state of our economy ten years after the Great Financial Crisis. Financial markets, producers, consumers and governments alike have their heads in the clouds and are loath to leave the dinner party. We do not expect them to change their mind next year. In our economic outlook for 2020, ‘Living in a castle in the air’, we analyse the worrying cocktail of low global economic growth and elevated financial markets and explain how we allocate our assets to account for this new reality.


Economic outlooks and asset-allocation recommendations abound, this time of year, with titles as 'Lower for longer', 'Cautious but stable outlook', or ‘Moderate growth’. This is the kind of contemplation of a sector that is quietly coming down from a long period of rising returns. No trace of anxiety, let alone panic, but rather a satisfied complacency. The general tenure is one of lower returns than this year, downside risks, generous central bank policies and end of the economic cycle. Prosperity is still around the corner, only slightly less than before.

Ours is an unsustainable system. We shouldn't waste time but start transforming it.

Time to move

To us, remaining seated at the table means prolonging an unsustainable system. The accommodative monetary policies by central banks and (planned) fiscal stimulus by many governments provide a false sense of security; they fuel an unsustainable status quo of lower global growth and further inflated asset prices. In our view, this might be the main threat to the global markets. Air castles tend to disappear into thin air. We do not know when and how but are convinced it will happen sooner or later. The consequences are not hard to imagine.

What we need now more urgently than ever, are targeted green monetary and fiscal policies to secure sustainable economic development. Environmental risks should be the top priority of these policies, as both the likelihood and potential impact of environmental risks have severely increased during the last decade, according to the World Economic Forum. The likelihood and potential impact of conventional economic risks have on the other hand decreased. It is hopeful that governments are indeed likely to turn to fiscal policies to sustain economic growth, even though measures would only make sense if they indeed steer towards a more sustainable economy. Undirected fiscal policies would just continue the status quo, thereby further weakening the fragile state of the economy.

So, hopefully, policy makers will finally leave the table coming year. There is no time to waste.

Webinar Investment Outlook 2020

Join this webinar with Hans Stegeman, Head of Investment Analysis & Economics, and Joeri de Wilde, Investment Strategist, for a live discussion of our views on the economy and financial markets for 2020.

December 13, 12:30 pm