2019 was an excellent year for global and US stocks.
- The US S&P 500 (SPY) gained +29% in 2019.
- The tech-heavy NASDAQ 100 (QQQ) gained +35%.
- The Vanguard Global Stock Fund (VT) gained +22%.
- Emerging Markets (EEM) gained +15%.
I see a few factors driving the big gains in 2019.
Global economy expanded nicely: The global economy had a solid year of growth in 2019.
Corporate earnings hit a new all-time high: US corporate earnings hit a new all-time high in 2019.
The Federal Reserve lowered interest rates: The Fed lowered interest rates a few times in 2019 and that sent rates a multi-year low – that is a like a stimulus for stocks and the broader economy.
China Trade Deal: The US and China have reached the early stages of a trade deal. However, regardless of the exact details US stocks aren’t very worried about this situation any more.
What to expect in 2020?
I am expecting to see some volatility from US stocks in 2020. As always there are lingering threats to the bull market.
- US presidential election could cause some volatility in markets.
- Stock valuations are getting into historically high levels.
- Political uncertainty in the Middle East particularly Iran.
- US, China trade relations could get cold again.
However, despite my expectation for some short-term volatility – I am expecting another solid year for US and global stocks.
At the highest level, when stocks have a monster year like 2019 it usually leads to another good year. Here are some more details from CNBC.
The S&P 500 is up more than 27% this year, the best run through Dec. 16 since 1997. But instead of this being a sign that the market is due for a pullback, similar situations in the past have resulted in gains in the final weeks and in the following year. The gains were typically more modest.
In addition to this correlation, a lot of the positive forces that were in play in 2019 will continue to be in play in 2020.
- The global and US economies are both expected to grow nicely in 2020. This is another way of saying it doesn’t look like a recession will hit in 2020.
- Corporate earnings will hit a string of new all-time highs in 2020.
- Interest rates will remain low.
My Prediction for 2020: S&P 500 up +10% to +15%.
I’m excite about 2020. I think it’s going to be another great year for the stock market.
Happy New Year!!