By Caroline Gerber
Investor sentiment risk has driven markets to new records when 2019 comes to an end. In the last few weeks of the year, US equities reached a record high with an increase of around 28.5% before the last trading day, partly fueled by the Fed's decision to lower interest rates three times this year, most spending cuts a year since the financial crisis of 2008.
Add to the positive attitude: recent major geopolitical risks have cooled. The trade dispute between the US and China, which has kept investors under control since mid-2018 and has cost the global economy around $ 700 billion, according to the IMF, could sign a Phase One agreement in January. This alone boosted investor confidence and global and US markets in December.
Brexit, the other political stalemate that investors are concerned about, is also on its way to some sort of decisive resolution after the UK general election on December 12 was vigorously won by Prime Minister Boris Johnson. That victory shifted the political map and enabled the Prime Minister to leave the EU even if the inevitable struggle to "get Brexit done" becomes a difficult exit.
Although optimism drives stocks, persistent global economic uncertainties have helped to eliminate. Precious metal in the safe harbor increased by around 16.31% with one trading day remaining in 2019. Trade risk, Stagnating growth in Europe and Japan and political unrest in Hong Kong and Latin America remain market risk .
On the domestic front, many of the long-awaited unicorn IPOs of 2019, including Uber (NYSE :), LYFT (NASDAQ 🙂 and Slack (NYSE :)), have seriously left investors at a disadvantage. Another announced debut, WeWork, completely collapsed before it even reached the starting gate.
However, for all the noise and anger surrounding the revival of the first public offering, it was Saudi Aramco & # 39; s (SE 🙂 tender on Riyadh & # 39; s Tadawul scholarship, which overshadowed them all, which turned out to be the largest IPO in history, with 25.6 billion giving the producer a value of $ 1.7 trillion. (As Aramco shares peaked at $ 38 on December 16, they have fallen by 7.63% to the current price of $ 35.1).
To start 2020, we have engaged some of our most popular contributors to understand where they see markets going in the coming year. In this part 1 of our two-part series, three contributors weigh where they think equities are on their way next year. Tomorrow, New Year's Day, we will publish the analysis of the contributors focused on commodities, forex and the general market outlook.
Declan Fallon: new outbreak after recovery of cyclic bears
Most of 2019 was spent recovering the losses from the last part of 2018 with the S&P and waiting until October to finally offer the rally that brought new record highs for this year. The has to make up for something, with the 2018 high around 1.740 at some distance.
SPX Week card
Although some may speak of big gains made for indices from the beginning of the year, we are really looking at a new outbreak after a cyclical bear recovery. If set up this way, the real winner for 2020 could be growth stocks.
The Russell 2000 (via iShares Russell 2000 ETF (NYSE :)) is ready to challenge the 2018 high with a mini-breakout of this year's consolidation. This is a very healthy looking graph.
IWM Week card
Adding fuel to the rally is an election year that Trump wants to pump.
It did well for 2019. Like the railroad companies of the past, it is a bellwether for the economy, so when it is booming, companies are expanding and updating their technological requirements. Although the pace of this rally may slow for 2020, the tone has been set for the year.
SOX Week card
Traders may have to wait until the summer before they see some joy at the top. The 200-day MA was the bounce point from the beginning of the year and 4,500s was a resistance level in 2017, so it could be support for 2020. Bitcoin is for Millennials just as Gold is for Boomers; it will have its day again.
BTC / USD weekly chart
Michele Schneider: Look at growth signals from Russell, Retail, Transports
Given the December rally in the indices, and in particular the S&P 500, and the two possible scenarios for 2020:
Or the market is progressive and it is assumed that the economy will start to expand in 2020. Or, by keeping interest rates close to zero or, in some cases, negative, the Federal Reserve and global central banks have encouraged companies to continue their record share-buybacks for the coming year.
To date, companies have done little to expand development or recruitment. Instead, they mainly raised dividends to reward shareholders and also invested in their own shares. That will have to change to the.
.
To see if the US economy is indeed growing, investors must look at the domestic focus along with two key sectors:
The Russell 2000 (IWM) is the best representative of the American economy. It consists of small cap companies that produce or produce goods in the US. To date, IWM has begun to step out of a base, but it is still far removed from the record highs of all time in 2018. We can consider IWM as the "delivery" side of economy.
(NYSE 🙂 has also lagged behind the SPX (via the SPDR S&P 500 ETF (NYSE :), the NASDAQ (via Invesco QQQ Trust (NASDAQ 🙂 and the (via SPDR® Dow Jones Industrial Average ETF Trust (NYSE : With FedEx (NYSE 🙂 's recent bleak performance, transportation or the demand side of the economy has an important job to prove that goods move across the country, IYT must hold over 188.00 and eventually release 200.00
Bricks-and-mortar Retail (NYSE 🙂 is the biggest lagger with weak. This sector has been the ugly duckling, reflecting the high consumer debt that is likely to increase further during the holiday season. That is why XRT must keep above 44.00 and release 47.00 or the highs of 2019.
Regardless of what the main index and sectors do, geopolitics 2020 is probably more volatile. That makes stagflation another real possibility.
In 2019, the ratio between stocks and commodities reached a low point in 100 years. At the end of 2019 the ratio has shrunk somewhat, but can shrink much more in 2020. It has been muted since 1979. Given statements by Steven Kaplan, the president of the Dallas Reserve, that interest rates will stay low and the future of the world if the reserve currency is questionable, the best commodity transactions for 2020 could be. More about this tomorrow.
To summarize, investors must monitor the small caps, transportation and physical stores for signs of economic growth or stagnation. With low interest rates, an uncertain future for the dollar and rising geopolitical volatility, inflation should increase with the possibility of an emerging stagflation environment.
Jani Ziedins: no repeat of 2019, but 2020 can be great for opportunistic swing traders
2019 was the year of a generous and gentle rally. The S&P 500 climbed by almost 30% and most withdrawals were benign, with prices recovering quickly. This power was certainly helped by a snapback from the 4th quarter of gross oversold 2018. Regardless of the source, this appears to be the second strongest annual performance on the market since the dot-com bubble.
Although crashes are scary and forever in the memory of everyone who lives through them, they are extremely rare. Most active traders will only see one or two in their career. Will one of those years be next year? Probably not. Especially since the market is not grossly overbought or overleveraged as it was during the dot-com and housing bubbles. Shares are by no means cheap, but they are not "bubblelicious" either.
Unfortunately for us 2020 does not look like 2019, because the market almost never repeats a performance and will not be different next year. If we cross the prospect of a strong rally from the list of possibilities, three possible scenarios remain: modest rally, slight dip or stock market crash.
Crossing both extremes of the list leaves us a little up or a little down. At this point I could see both happening. The labor market is tense and will continue to monitor economic growth in the future. If a company cannot find new staff, it cannot expand, regardless of strong demand.
On the other hand, modest gains on the stock market can easily be wiped out if an unpopular Republican president is replaced by a democrat. Fear of imminent regulation and taxes will cause shares to withdraw in the last months of 2020. And so, that's my forecast, a fairly modest gain between 5% and 10% if Trump wins. If he loses, expect a flat year.
But where we end is just a piece of the puzzle. How we get there is even more important for active traders.
Everyone knows that stocks cannot sit still and as a raised 5 year old they must always be on the move. Sometimes they go up for longer periods such as in 2019. Other times they go relentlessly like in 2008. But usually they go up and down for no other reason than that they cannot sit still. 2020 will be a year of exercise just because it means a lot of moderate dips and bouncing along the way.
Although it will not appear in a long-term portfolio, 2020 will be a great year for the opportunistic swing trader.
