NEW YORK (Reuters Breakingviews) - The world needs to make some burning decisions in 2020. That’s why this year’s Breakingviews Predictions book is entitled “Turning up the heat: a pivotal year for profit, politics and the planet.” If that sounds like overreach, paired with a cliché, so be it. Humanity is at something of a crossroads.
Read the book online: bv-predictions2020.com
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Start with politics. The pro-democracy protests in Hong Kong continue and may prompt the People’s Republic of China to act. UK Prime Minister Boris Johnson, fresh from a stunning election victory, will push ahead with Brexit, even if it means the dissolution of Great Britain. Meanwhile, American voters will return to the ballot box in November to either send to the White House one of the many Democrats still running for president or, assuming he survives impeachment, reelect President Donald Trump. The choices made in each instance will have ramifications for years, perhaps a generation.
Next, as our cover photograph of fires raging in the Amazon suggests, comes global warming. This is supposed to be the year when the almost-200 governments which signed the 2015 Paris accord make good on commitments to curb greenhouse-gas emissions. It does not look promising, based on the disappointing outcome of a United Nations climate-change confab in December. Failure to act risks sparking more of the devastating wildfires that have raged recently across Brazil, California and Australia. These, along with more floods and droughts like those seen from India to Nebraska to Iran, will have an immense impact on economic activity in the short- and long-term.
Despite all this doom and gloom, we begin our book with some positive predictions. On climate, for example, the rising need to act will spur shareholders to take bolder stances with some of the major greenhouse-gas emitters – and their supply chains. And what would scream Federal Reserve independence from climate-change-denying Trump more than for Chairman Jay Powell to take the central bank into the Network for Greening the Financial System? There’s an opportunity here for bankers, too: The M&A adviser who adds climate issues to her repertoire will find receptive clients.
Green deals won’t be the only ones being struck, though. Expect a rare 11-digit leveraged buyout to be unveiled in Asia in 2020 – even as fears grow elsewhere about private-equity financing. There may even be another big merger contemplated between carmakers, with BMW-Daimler, as our top pick. The 30th anniversary of German reunification brings some welcome relief to struggling Commerzbank and Deutsche Bank in the form of fees from helping eastern German entrepreneurs prepare for retirement.
And, as always, we indulge in a bit of fantasy corporate finance: Blackstone boss Steve Schwarzman will reunite his firm with BlackRock – unless Goldman Sachs Chief Executive David Solomon beats him to it.
Elsewhere, look for Indian Prime Minister Narendra Modi to pull a rabbit out of his hat to bolster the economy. Watch as Twitter and Square CEO Jack Dorsey becomes the anti-Facebook hero. And we even imagine how welcome a return of inflation would be – in modest amounts, of course.
There will also be fiery trouble ahead. The continuing tensions in Hong Kong are likely to burn investors. Bankers to the ultra-wealthy are in danger of stoking a superprime bubble. Russia and South Africa will both disappoint markets. And serial defaulter Argentina is heading back for another round of bond restructuring that could scorch the sovereign-debt market.
We also make space for some lighter-hearted observations. A mix of new standards, sustainability and short-term stimulus will help Tokyo benefit from hosting the Olympic Games. The most important job for companies to fill will be the one that fills jobs. And beware the peak of the subscription economy.
Predicting the future is a risky business - and we often get singed for sticking our necks out. Last year we asserted that Japan would be the stealth threat to the global economy in 2019. Unless well-cloaked, we were wrong. And the market debuts of Lyft and Uber did not affect Tesla’s scarcity value at all.
But when we prognosticate correctly, the stakes are high. Voters did indeed give Mauricio Macri the boot as Argentina’s president. And we laid out why write-downs were in the immediate future for SoftBank’s Vision Fund: The colossal failure of WeWork to launch an IPO became Exhibit A. For 2020, we’re doubling down on that one and pushing for an activist to take on SoftBank boss Masayoshi Son.
Whether or not we succeed on that call and others, our main goal is to provide thought-provoking financial analysis of the biggest topics in global finance, business, technology, markets and economics. Continuing to do so is one prediction we can guarantee.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
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