The bull market will extend its run as growth recovery is set to take root in mid-2020, Bank of Singapore said in its forecast for 2020. Its base case is that the US tariffs planned for December 15 would be postponed or suspended, and that a Phase 1 trade deal would eventually be ratified in 2020.

The sustenance of the bull run is based on past experience of recovery in 1995, 1998, 2012 and 2016 but since valuations are rich, the gains would be modest. It said global equities were trading at a 12-month forward price-to-earnings multiple of around 17 times, which is around 0.7 standard deviation above the 20-year historical average, and credit spreads are not signaling cheapness either.

It expects authorities in China, Japan, UK and EU to extend fiscal support to their economies but warned about late-cycle headwinds in the form of pressure on corporate margins from rising wages, lack of corporate pricing power, high debt levels, and the lower bound constraints faced by central banks. It has moderately overweight positions in European Equities and EM High Yield.

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