"We will have a new crisis of the euro and a banking crisis in 2020"

This Tuesday, Felix Zulauf from Switzerland, a market specialist, was invited to speak at the second "Fund Insiders Forum" of L'Echo and Tijd, organized at the Hotel de la Poste, on the site of Tour & Taxis in Brussels.

In addition to being the founder of Zulauf Asset Management, of which he is president, Felix Zulauf is also known for his very sharp market analysis. He is also a consultant to several major investors and regularly publishes his own thoughts on macroeconomic issues. He is also famous for his outspokenness and, in "good" Switzerland, he is rather skeptical about the European Union and the euro.

Zulauf paints a rather gloomy picture of the global economy. China's integration into the global economy over the last 30 years has caused an explosion in international trade. We have had periods of slowing globalization, and with the current wave of protectionism, we are on the eve of a new correction. This period could last between 10 and 15 years and play tricks for companies that have experienced strong growth over the last ten years.

One of the major reasons for the return of protectionism is that globalization produces not only winners, but also losers. In the emerging countries – particularly in Asia and China – the middle class has grown considerably, while in rich countries – in Europe and North America – it has declined in relative terms. His dissatisfaction has weakened traditional political parties and created a breeding ground for populism. "Revolution against the establishment should worsen"warns Zulauf. "The resistance will continue until the citizens get satisfaction."

China also has some advantages that are lacking in the West. "The Chinese are much smarter than us: they have a long-term vision, which we sorely lack. And they work very hard because they want to get there. " China's strong growth, both economic and political, has swayed the throne upon which the United States was seated, and is partly responsible for the emergence of protectionism.

Zulauf expects this trend to continue over the next decade and that the conflict continues between the United States and China. "The period of good agreement is now a thing of the past." It does not exclude that a war ends up explodingand, if so, potential forces clash in the South China Sea.

In the West, Zulauf thinks that populism will dominate in the coming years. "Almost all politicians are populists, they make small gifts to their constituents, these little gifts are called social security." A populist economic policy goes hand in hand with isolationism, protectionism, stimulus policies, devaluation and growing indebtedness. Their long-term impact is catastrophic, warns Switzerland: declining living standards, inflation and financial "disruption". For him, "politicians give money to win votes, while they should win with good ideas. "

How does Zulauf see our near future? He expects the US economy to reach its lowest point in the spring of 2020 and then rebound. "Trump will be relieved if the economy starts again because it will increase his chances of being re-elected."

His vision for China is very different. After years of strong growth, the Chinese economy is in the process of consolidating, a period that should last from five to eight years, he believes. "Do not count on China to quickly resume its role as the engine of the global economy"warns Zulauf. This situation will also have consequences for Europe, which is highly dependent on Chinese growth over the last ten years.

Zulauf is equally worried about the situation in Europe. He believes that the euro is "far from being a success and that the single currency causes many imbalances". Imbalances that will sooner or later have to be rectified. He expects a new crisis to erupt in Europe next year: a crisis of the euro and perhaps also a banking crisis.

What can investors expect in these circumstances? Not much, says Zulauf. Bond yields will remain low as they support the entire monetary system.

In 2011, global stock markets were expected to grow at an average annual rate of 8% over the next 10 years. In 2019, these expectations were sharply revised downwards to 2.5% per year. "You may receive dividends, not much, but bonds pay even less"he adds. "You must be a very talented 'stock picker' or an excellent 'market timer' to get more than this 2.5%. Or invest in a fund that succeeds in doing better."

Zulauf believes that gold also deserves a place in all portfolios. He expects a new phase of rising gold prices next year.

Stock markets could show good results in the short term, says Switzerland. He expects that the United States and China will soon conclude a trade agreement. Probably a "cosmetic deal"which will allow the markets to finish the year in style.