Looking Ahead with Confidence in 2020Christopher Briggs, RRC®, Wealth Advisor
Happy New Year, and welcome to the new decade!
The start of any new year is a time often rife with market predictions. But remember to keep perspective during prediction season.
Perhaps one of the more striking reminders of the dangers of predictions occurred 40 years ago when Businessweek Magazine declared the “Death of Equities.” It warned the “death of equities as a near permanent condition.” While inflation was rampant and markets did perform poorly during this time, as Bloomberg recently noted in embarrassment, “the total return on the S&P 500 stock index since its 1982 low, with dividends reinvested, has been nearly 7,000 percent. Not bad for a corpse.”1
These dramatic predictions haven’t subsided over time, likely because the media thrives on this type of excitement. In 2016, the Royal Bank of Scotland warned of a “cataclysmic” year, advising investors to “sell everything except high quality bonds.”2 Investors who did so would have missed out on a gain of 27.6 percent since that time.3
While we shouldn’t ignore the work of analysts, economists or researchers, we should be careful not to make longer-term decisions based on any short-term worry created by the media. Nobody can predict the course of near-term markets, except to say that fluctuations in both directions should always be expected.
What is the Outlook for 2020?
2019 was a year of ongoing geopolitical concerns, slowing economies, global trade tensions, and another hard run for the resources sector at home. And yet, equity markets in Canada and the U.S. held their own quite well. The year ahead brings similar uncertainty. However, should the U.S. and China make progress towards reaching a partial trade deal, it could help to temper some trade tension uncertainty and support growth. We are also in a U.S. presidential election year, historically a time in which U.S. equity markets have performed well.
Regardless, portfolios should be positioned for the longer term, with the expectation that markets will experience ups and downs. Many techniques are used to manage risk, including maintaining diversification, rebalancing to a certain asset mix, and upholding quality criteria, among others. For each investor, these will depend on factors such as investment objectives, needs, stage of life, and risk tolerance. These considerations will help to weather the inevitable storms.
During this prediction season, continue to look ahead with confidence. May the turn of the year bring health, happiness, and prosperity to you and your loved ones.
3 Based on FTSE 100 at 1/3/16 & 9/1/19.