What's going on?
2020 is fast approaching, and analysts are expecting things to be slow and steady following this year’s boom. Here’s hoping there are no party-crashers to worry about…
What does this mean?
The ongoing expansion of the US economy is the longest in its history, but it’s finally starting to slow down. And that’s true of the global economy as a whole: while economists are forecasting growth in the year to come, they’re expecting it to lag behind that of 2018.
That slowdown in growth could hit company earnings and, in turn, the stock market. Analysts polled by Bloomberg think US stocks will go up by an average of 4% in 2020, compared to 2019’s more-than 25% gains (tweet this). And with the increasing danger of bankruptcies as higher wages put profits under pressure, many analysts are recommending a Goldilocks approach: taking on investments with just the right returns for just the right amount of risk.
Why should I care?
For markets: Look for quality.
Some investors are leaning toward “quality” investments: companies with stable earnings, high margins, and healthy ratios of assets to debt. That’s in contrast to the “growth” stocks (e.g. tech companies) that’ve been popular in recent years. Others are recommending dividend-paying stocks, which promise a regular cash return on top of future price increases. So-called defensive stocks – like utilities and consumer staples – could also come into vogue if the economy continues to slow: they offer the kind of products consumers need no matter the economic climate.
The bigger picture: Nothing’s certain.
2020 is set to be marked by yet more uncertainty: the US-China trade war isn’t going anywhere despite a phase one deal, the US presidential election could turn the country’s healthcare and tech industries upside down, and the UK is all set to leave the European Union (for real this time). It’s not easy to predict where these will lead, which is why some analysts suggest diversifying your investments across regions and industries, so you’re not too exposed to any one risk.