How Might The Market Behave In 2020?

Another year is in the books, which means we can all get to work analyzing the trends and trying to predict what’s to come. We said goodbye to 2018 with a difficult December where the market dropped drastically due to recession worries, then enjoyed a 2019 full of unexpected, stellar returns. Does that mean we’ll see a repeat performance for 2020 or should we temper our excitement? 

Less Room For Growth

Year after year, we’ve seen this market expansion continue and hit record highs frequently. That’s nothing to complain about, but it does leave us with less room to grow. With such a volatile December in 2018, the markets had plenty of room for improvement in 2019. There simply aren’t as many new heights to reach in 2020 since we are starting near record highs on the tail of a strong year for both stocks and bonds worldwide. Right now, the S&P 500 is trading at 21.1 times its earnings. Last year at this time, it was trading at 16.5 times earnings and the average over the last 2 decades was 17.7 times earnings. (1) That’s why financial experts are not expecting the same kinds of returns we saw last year.

Strong And Stable

Even though you shouldn’t expect a repeat of 2019’s amazing gains, that doesn’t mean you need to worry. The economy is still growing, chugging along at a modest rate. There is little risk of a recession in 2020, especially with the progress made on U.S.-China trade and the Federal Reserve’s commitment to keeping interest rates low. One of the biggest unknowns for 2020 is how the presidential election will impact the economy, but with a strong foundation, the impact should not be great or long-lasting.

Analysts are expecting continued growth for 2020 and this next decade, though at slower rates than we saw last year. Vanguard forecasts American stocks to return 3.5% to 5.5% gains over the next decade, which is much lower than we have seen recently. (2) Even if gains are lower, they are still expected to be positive.

How Should You Prepare? 

What does all of this mean for you practically? First of all, it is important to remember that no one has a crystal ball and any predictions you hear are merely guesses. No one predicted that 2019 would be the S&P 500’s best year since 2013, (3) and none of us know for certain what the future holds. We are just making educated guesses and there is no guarantee that what we expect will happen. 

In light of that, it is important to have a balanced investment strategy that takes into account all possibilities. A well-diversified portfolio designed with your specific time horizon in mind should be able to meet your needs whether the market returns 2% or 20% in 2020. 

The greatest danger in prosperous times like these is for investors to become complacent or greedy and ignore the proven principles of long-term investing. If you want to make sure that your portfolio is prepared for whatever 2020 has in store, we at My 401K Consultant are here to help. Schedule a free introductory 15-minute phone call today! 

About Michael

Michael Klonsky is a CERTIFIED FINANCIAL PLANNER? practitioner and Accredited Investment Fiduciary? designee with more than 20 years of experience working with individuals, families, business owners, and professionals. He specializes in guiding his clients to a financial investment plan customized to their needs, empowering them to take control of their retirement savings. Michael graduated from Ohio Wesleyan University and spends his spare time staying involved in his community. Mike is a past president of the Massachusetts chapter of the Lymphoma Research Foundation. He dedicated his 2012–2013 triathlon season to raise money for the Massachusetts General Hospital’s Cancer Center. Mike is training to swim the English Channel in August 2020 to continue his fundraising for the Cancer Center and to help fight childhood hunger in the United States. Mike was recognized as a 2010 Massachusetts General Hospital Cancer Center honoree for being one of the 100 individuals whose diligence, philanthropy, and passion have helped advance the fight against cancer. Mike enjoys staying involved with his children’s many sports teams, participating in open water swimming, and skiing. He and his wife, Toni, reside on the North Shore of Boston with their children. To learn more about Mike, connect with him on LinkedIn or schedule an appointment with him online.

Securities and Advisory Services through Commonwealth Financial Network, Member FINRA/SIPC, A Registered Investment Adviser. Fixed Insurance products and services offered through New England Wealth Management. 

New England Wealth Management does not provide legal or tax advice. You should consult a legal or tax professional regarding your individual situation. 978-739-4900  27 Garden Street, Suite 1A Danvers, MA 01923.

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(1) https://www.nytimes.com/2020/01/01/business/wall-street-markets-2020.html

(2) https://www.nytimes.com/2020/01/01/business/wall-street-markets-2020.html

(3) https://www.nytimes.com/2020/01/01/business/wall-street-markets-2020.html