Following a lackluster close to 2018, 2019 from all perspectives was unexpectedly a great year for equities. Here in North America markets reached all time highs.
Now What for 2020?
As much as 2019 was a dynamic and unpredictable year, we can expect 2020 to be just as tumultuous. Still, it’s a great time to be an investor and market participant.
With all economic indicators still very strong in the U.S. we expect that it will be like a BBQ grill about an hour after you’ve taken the steaks off – still kind of hot but not blazing. The global economy on the other hand, may start to pick up steam after being in the doldrums for the past few years. China’s growth is admittedly slowing, but it is still growing at better than 6%, and the Chinese government is doing whatever it can maintain that. China’s neighbouring economies should see more growth due to low interest rates and a cooling trade war with the U.S. Continues.
Will there be a Recession?
We (and many others) think not likely in 2020, notwithstanding any unforeseen shock. All the leading indicators still have some juice in them. The resolution of the trade war with China will help boost corporate confidence. The U.S. consumer remains strong due to a strong jobs market, low inflation and low interest rates.
Will the market continue its Upswing?
We feel that the U.S. markets will grow, but nothing like we saw in 2019. Brian Belski, Chief Investment Strategist at BMO Capital Markets, has had a particularly good run in predicting global equity markets in the last few years is still bullish, moderately. He is calling for another year of gains for Canadian stocks in 2020 -- albeit a smaller one -- with a year-end target of 18,200. That’s 6.4% higher than the 2019 closing level. He also expects U.S. stocks to rise at a slower pace with a target of 3,400 for the S&P 500, or 5.5% higher than Monday’s close. Still good, not anything like 2019, but way better than negative.
What about Trump’s Impeachment
Markets hate uncertainty. The view that markets are taking now is that the outcome of the impeachment process is predictable. The Democrat lead congress have passed the articles of impeachment, but the consensus is that it will die a quick death in the Republican lead Senate. In perspective, since House Speaker Nancy Pelosi initiated the impeachment process in early September, U.S. equities rose 7% to year end. In the year following President Bill Clinton’s impeachment inquiry in 1998, the S&P rallied 39%. He was acquitted by the Senate. It appears that market moves are most closely associated with the economy than party politics.
2020 is an Election year in the U.S.
President Trump isn’t going to want to break the markets before the next election in November and will likely do everything he can to preserve the current, balmy economic conditions. And, as we know, traditionally equities are positive in election years.
How does this affect your Portfolio?
With expectations of single digit returns in equity markets, we continue to be more defensive in our management of your portfolios. We continue to provide a balance of assets with fixed income expectations of 4-5%, equity expectations of 5-6% and a continuation of structured notes providing good income with some downside protection. As always, we will be in contact if and when adjustments are necessary.
Let’s all look forward to a happy, healthy and prosperous 2020. From our family, to yours.
Happy New Year