The Year That Was - The Midas Touch in Action (Global)

The article above is Aon's Reflections on 2019 and the Outlook for 2020.

Take the calendar year just completed and marvel at just how well markets did. The S&P 500 returned some 31%, but other equity markets were not outdone by much. Only against the US market’s runaway performance yardstick does the 19% return in emerging markets and Europe’s 26%, appear anything other than very strong. Yes, the US technology sector’s 50% return and Apple’s doubling in 2019 did seem to put much else in the shade, but the relatives here must not obscure the absolute. What is more, other asset classes beyond equities delivered strongly too. Virtually everything made money during 2019 and lots of it.

Demonstrating that this was no ordinary market rally was what happened at the other end of the risk spectrum to equities. Government bonds defied conventional wisdom and produced strong returns too, some of the best risk-adjusted returns in the markets (the US long government index delivered almost 15%). And how about gold, a ‘traditional safe-haven’ which returned about 18% in the year? Amidst some truly extraordinary market conditions last year, other notable features were the way defensives still managed to outperform the cyclically sensitive through this big rally, and the way that value stocks, despite some signs of life in the second half of last year, still failed to claw much lost ground back.

Of course, a moment spent looking behind the numbers shows that taking an arbitrary window like a calendar year can hide some sins. 2018 had been a turbulent year and finished with a big sell-off, so some part of 2019 strength was part relief rebound. This is why taking 2018-19 together shows a rather different picture to just looking at last year in isolation – global equity indices doing about 5% per annum over the two-year period instead of the gain five times larger that appears from looking at last year alone. Even so, credit should be given where it is due, and we cannot take much away from markets pulling off such a dramatic turnaround from what looked a very difficult backdrop at the start of last year.

You do not have to look far to find the reasons for the spirited market comeback. Spooked by the widening trade conflict between the US and China, a rapid freeze of global trade and a deepening global economic slowdown (which could have led to an even deeper market meltdown than that in late in 2018), central banks turned remarkably easy with monetary policy last year. Pre-eminent though the US Federal Reserve’s three rate cuts last year were in market impact terms, the easing trend went far wider. In 2018, 43 central banks had raised rates against 32 that had cut them. Last year, 60 central banks cut rates and only 15 raised them. After such a difficult 2018, this was healing balm to all asset classes, a central bank Midas touch in action not seen on this scale since the aggressive monetary response to the 2008 financial crisis. It revived spirits in very risky and troubled asset markets like equities and high yield, easing fears of global recession. But it energised bond bulls too, who anchored low yield expectations to lower central bank rates and a view that lower rates were more likely to persist.

That equity and bond markets were implicitly taking rather different views on the likely path of economic activity looking ahead, one betting on a rebound, the other on continued weakness, did not seem to trouble anyone very much. The polarisation of views came through in market behaviour, however. Within asset classes and between them, right across the spectrum, trends were simultaneously risk-loving and cautious. Rising markets made this confusion seem benign.

Quite a year, in other words.

About Aon
Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

For further information on our capabilities and to learn how we empower results for clients, please visit

© Aon plc 2020. All rights reserved.

This document and any enclosures or attachments are prepared on the understanding that it is solely for the benefit of the addressee(s). Unless we provide express prior written consent, no part of this document should be reproduced, distributed or communicated to anyone else and, in providing this document, we do not accept or assume any responsibility for any other purpose or to anyone other than the addressee(s) of this document.

Notwithstanding the level of skill and care used in conducting due diligence into any organisation that is the subject of a rating in this document, it is not always possible to detect the negligence, fraud, or other misconduct of the organisation being assessed or any weaknesses in that organisation’s systems and controls or operations.

This document and any due diligence conducted is based upon information available to us at the date of this document and takes no account of subsequent developments. In preparing this document we may have relied upon data supplied to us by third parties (including those that are the subject of due diligence) and therefore no warranty or guarantee of accuracy or completeness is provided. We cannot be held accountable for any error, omission or misrepresentation of any data provided to us by third parties (including those that are the subject of due diligence). This document is not intended by us to form a basis of any decision by any third party to do or omit to do anything.
Any opinions or assumptions in this document have been derived by us through a blend of economic theory, historical analysis and/or other sources. Any opinion or assumption may contain elements of subjective judgement and are not intended to imply, nor should be interpreted as conveying, any form of guarantee or assurance by us of any future performance. Views are derived from our research process and it should be noted in particular that we can not research legal, regulatory, administrative or accounting procedures and accordingly make no warranty and accept no responsibility for consequences arising from relying on this document in this regard.

Calculations may be derived from our proprietary models in use at that time. Models may be based on historical analysis of data and other methodologies and we may have incorporated their subjective judgement to complement such data as is available. It should be noted that models may change over time and they should not be relied upon to capture future uncertainty or events.

Aon Hewitt Limited is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales.
Registered No: 4396810.
Registered Office:
The Aon Centre
The Leadenhall Building
122 Leadenhall Street
London EC3V 4AN

Copyright © 2020 Aon plc

About Aon Global Asset Allocation

Where are we in the economic cycle? What is the relative value of different asset classes?
How are technical factors, such as regulation, impacting prices? Aon’s Global Asset
Allocation team continually asks and answers questions like these. We use our findings to help
clients make timely decisions about asset allocation in their schemes’ portfolios.

With over 130 years’ of combined experience, Aon’s asset allocation team is one of the strongest
in UK investment consultancy today.

Our experts analyse market movements and economic conditions around the world, setting risk
and return expectations for global capital markets.

The team use those expectations to help our clients set and, when it’s right to do so, revise their
long-term investment policies.

We believe that the medium term (1–3 years) has been under exploited as a source of investment
performance. Maintaining medium-term views that complement our long term expectations, we
help our clients to determine when to make changes to their investment strategy.

Copyright © 2020 Aon Hewitt Limited
Aon Hewitt Limited is authorised and regulated by the Financial Conduct Authority.
Registered in England & Wales. Registered No: 4396810.
Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London, EC3V 4AN

Previous Flipbook
2020 and Beyond - It is So Much Harder to Get Return (Global)
2020 and Beyond - It is So Much Harder to Get Return (Global)

Aon's Global Asset Allocation Team 2020 Outlook

Next Flipbook
Factor Investing – Standing Out from the Crowd (Global)
Factor Investing – Standing Out from the Crowd (Global)


How May We Help? Reach out to an Aon consultant now.

First Name
Last Name
Job Title
Phone Number
Aon group companies will use your personal information to contact you from time to time about other products, services and events that we feel may be of interest to you.  All personal information is collected and used in accordance with our privacy statement.

Please click here to manage your communication preferences
Someone will be in contact shortly!
Error - something went wrong!