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The year 2019 was a surprisingly excellent period for a lot of significant stocks. It turns out, 2020 may be an even better year for leading stock market indices.
In August 2019, the stock markets took a beating from heightened trade tensions between the USA and China. By the end of the year, the S&P 500 had shaken off these worries, rallying to a record $3,230.78 to end 2019, a 28.9% yearly gain.
The million-dollar question is whether this momentum will carry on through 2020. Geopolitical trade tensions linger, but progress can come about with diplomacy. The assassination of Iranian General Qassim Selemani may have started 2019 on a worrying note. For instance, a look at the best trading platforms in Australia shows the ripple effect of the news on oil prices. Oil prices are up significantly on this development.
2020 will be an interesting year for those in the trading market. Bullish investors like Emanuel see the S & P having another monster year. Investors are still yet to fully embrace stocks through the bull market of 2019. This dynamic could change dramatically in 2020. Emanuel sees a resolution to geopolitical trade tensions and better global growth as catalysts in 2020. Whether you want to get started investing in stocks, or you are already an active trader, this analysis is relevant to understand what will shape the market in 2020.
Potential Drawbacks
Political events are an unfortunate reality for the stock markets. Stagnation or a wrong turn in US-China trade negotiations remains a massive threat to traders this year. Despite the robust bull market of 2019, analysis by Fortune Magazine showed that several big cap stocks weren’t as fundamentally strong as many would have thought. This fact means that the stock market cannot absorb the effects of more trade wars.
Besides, the US-Iran tensions can be an important factor for the global economy. The Middle East is an essential oil producer. Turmoil in this region can have adverse consequences for global growth. Iran may be significantly inferior to America militarily, but a full-blown conflict would still have global implications. More significant shocks like an extended armed conflict can lead to a significant correction in the entire S&P 500. Such an event would mean dreadful performances for companies that rely a lot on global trade and stability.
Oil prices leaped as soon as tension escalated. A strong energy market can be great for economies like Saudi Arabia that rely on oil exports. However, an extremely high oil market can present a crisis for importers.
Therefore, political events will play a massive role in the health of stocks overall. Investors were less than impressed with the outcome of phase-1 of the trade deal between the USA and China. The next phase of the trade deal is even more critical.
Furthermore, a closer look at the stock market in 2019 shows a lot of sectoral trends. Remarkably, about 1 in 9 companies finished the year in the red. Some companies like ABIOMED Inc. lost a remarkable 44% of their value. Moreover, several leading hedge funds took a beating from bull portfolios because of such sectoral disparities. Uniform growth is unlikely to come up suddenly this year.
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