With 2020 fast approaching, investors will be looking to the future for any indication as to how their investments are predicted to perform over the year ahead. Predictions are a notoriously difficult practice, as many are aware; investment risks, benefits, and returns can be one of life’s great uncertainties
It’s also a great source of stress as many look to reinvest, mix things up, or change course in order to maximize gains and prevent financial loss.
Turning their attention to the future, here’s what the experts are saying about the year ahead:
Stocks and Shares
As we near the end of 2019, stocks and shares are still proving to be a popular investment option. In particular, blue-chip stocks are a favorite and a haven amongst investors since the financial crash in 2008.
As of November 14th, the S&P 500 was up 23% on last year, providing a seemingly positive outlook for the start of 2020. Additionally, the NFIB index is relatively stable, but is expected by some sources to plummet if a democratic government is elected come 2020.
If previous behavior is anything to go by, the 2020 election is predicted to cause uncertainty. The purchasing of stocks may slow nearer the presidential election given what we saw in 2016, where the cyclical economy bottomed around the time of Trump’s election.
Market Watch recently talked with Tobias Levkovich – Citigroup’s chief U.S. equity strategist – who suggested that investors should brace themselves for tighter credit conditions, falls in profit margin trends, and stock volatility in late 2020 to 2021.
Despite the uncertainty around the upcoming presidential election in the states, a recession scare, and weak global growth, the US economy has outperformed and the dollar has remained firm throughout 2019.
That’s the year just gone, what about the year ahead? According to ING, you should keep your expectations in check – “…do not expect to see 2020 delivering many of the bullish FX outcomes witnessed in 2017.”
Come 2020, the trade volume growth is expected to be largely conservative, which will likely have many investors looking to emerging markets. Though the domestic market growth is predicted to slow, growth in emerging markets is expected to offset this slowdown and maintain global growth levels in 2020 similar to those of the current year.
This suggests that Foreign Exchange Trading may still have what it takes to excite and reward investors prepared to take on high-risk foreign investments.
According to Forbes real estate contributor Aly J. Yale, “the 2019 U.S property market has been one filled with low rates, high demand and limited supply”. The ‘softness’ within the U.S property market doesn’t seem to be deterring investors, however, as property investments are reaching an all-time high in the U.S.
According to Zillow housing economist, Matthew Speakman, “…recent declines in interest rates and an anticipated flood of new homebuyers should further reverse some of the softness seen earlier this year”.
Despite the global economic slowdown, the U.S. housing market is expected to say strong with an increase in home sales come 2020. Experts are calling this “one of the brighter spots in the U.S. economy”. Additionally, Sam Khater, chief economist at Freddie Mac says, “…housing starts, building permits, existing home sales, and new home sales are all outperforming the broader economy”.
The 2020 commercial property market outlook is also predicted to have a very good year due to low interest rates, strong property fundamentals, and resilient economic activity. However, due to the U.S Federal Reserve cutting rates, the commercial property market has become extremely volatile. Some suggest that these low-interest rates may have adverse effects, potentially resulting in a significant recession for the U.S.
Overall, those investing in private property should feel comfortable heading into 2020.
In its current state, the bond market is at its most volatile since 2016 when Trump won the Presidential election, and the U.K. separated from the European Union. Those with bond investments should expect the rollercoaster to continue until it is clear whether the economy is heading for a recession.
Predictions are expecting yields to remain below 2%due to increased worry around geopolitical risk and the strength of the impeachment process. Nevertheless, when stocks and interest rates fall, bonds are still likely to provide crucial portfolio stabilisers and even increase in price which highlights that bonds are still a great investment for diversifying your portfolio.
Exchange-traded funds are a more recent form of investment but are certainly not one to miss as their performance over the last two decades has been hugely successful. In fact, ETFs now hold approximately $2.6 trillion of assets globally. A recent report released by PWC stated that “ETFs will play a significant role in the growth of the economy and are likely to get an additional boost in the coming years from greater penetration of global markets”. However, the 2020 presidential election is expected to cause continued uncertainty, potentially boosting investor interest in low volatility exchange-traded funds (ETFs).
That said, reports are suggesting industrials are the only portion within the S&P 500 expected to perform positively this season. In an interview with CNBC, Dave Nadig, managing director of ETF.com, referred to industrials as “…the canary in the coal mine for the majority of next year”. Experts are suggesting that investors may want to add a subgroup such as aerospace and defence groups to further diversify for an equally-weighted portfolio.
Predictions are suggestingthat the ETF landscape will be dominated by asset flows in developed markets of the U.S. and Europe. However, less mature markets are likely to produce the highest rate of growth for the global ETF landscape.
Looking to the year ahead
Overall? The outlook for most investment options looks largely positive. Hopefully this brief investment outlook for 2020 has provided you with some insights going into the new year, and prepares you for what might lay ahead.