Wealth Daily's 2020 Market Outlook

With every calendar year comes a new wave of financial news and economic themes — themes that will ultimately dictate who comes out richer than they were the year before and who doesn’t.

2017, for instance, will long be remembered as the year of Bitcoin and a surging S&P 500. Speculators made a killing that year, given they had the foresight to take action when it mattered.

Likewise, 2018 brought its own unique opportunities and risks for investors. The year is now known for a resurgence in volatility and the beginning of the cannabis stock frenzy.

As for 2019, this year will likely be etched in history as a period of widespread uncertainty, one where analysts grappled with global trade spats, antitrust investigations, and a looming U.S. presidential election.

As we peer ahead at 2020 and beyond, there are undoubtedly many unanswered questions about the future of the global economy and how investors can best position themselves in the stock market for maximum profit.

Can the S&P 500 really keep breaking records? 

With the yield curve having inverted, is a global recession at this point unavoidable?

Where is the greatest opportunity for reward and the most significant area of risk?

The truth, of course, is that none of these questions can be answered today with full certainly. One day we’ll be able to look back at 2020 through a clearer lens, but for now the best we can do is prepare based on what we already know.

That said, we’re going to take this opportunity to do a little bit of forecasting from now through the end of 2020. We’ll highlight what the folks here at Wealth Daily expect to be the biggest financial themes of the year and, more importantly, how you can best leverage those themes as an investor.

2020 Market Theme #1: U.S.-China Trade War Conclusion 

The U.S. China trade war effectively began when Donald Trump was sworn in as the 45th President on January 20, 2017. Trump first began laying out plans to counter “unfair” China trade practices during his 2016 campaign and, within months of entering office, would sign two executive orders ultimately aimed at China.

In April 2017, Trump and Chinese President Xi Jinping had their first meeting and agreed to a 100-day plan for trade talks. Needless to say, that 100-day plan was insufficient time for the two economic powerhouses to come to an agreement.

Beginning in 2018, Trump began to clamp down on China, first alleging intellectual property theft, then later imposing tariffs on solar panels and aluminum. China soon retaliated with tariffs of its own, kicking off a cycle would escalate tensions through 2019.

Unlike in previous years, 2020 brings with it a sense of urgency for Trump, who is effectively on the clock to resolve trade discussions before the November election. Being someone who presents himself as a skilled “deal-maker,” Trump may very well want to conclude the trade war for the sake of optics.

Even if Trump doesn’t conclude the trade war with China by November 2020, there’s still the realistic chance he does not get re-elected (or is simply removed from office). With no Trump, there is no trade war, so either way there’s a good chance this whole thing wraps up in 2020.

2020 Market Theme #2: Antitrust Crackdown on U.S. Technology Companies

As is the case with any form of regulation, politics will have some degree of influence here, but, broadly speaking, there is a global antitrust crackdown underway on U.S. technology companies. This crackdown is going to be ever apparent in 2020, as a few major names come under direct fire.

In late 2019, the U.S. Department of Justice’s head antitrust official, Makan Delrahim, noted that there’s a growing bipartisan push to increase regulations on big Silicon Valley players. Delrahim was clear in his assessment that the idea of breaking up some of these companies is “perfectly on the table” and has already taken action to move forward in a potential antitrust case.

Delrahim says he has assigned four attorneys and two staff economists to train in artificial intelligence and machine learning to better understand big tech companies. Clearly, the department is gearing up to take action, potentially in 2020.

Although Delrahim has not discussed the department’s examination of any specific companies, it is widely recognized at this point that DOJ head and U.S. Attorney General William Barr is pushing a broad antitrust review. That review is centered on Facebook, Inc. (NASDAQ: FB), Alphabet Inc. (NASDAQ: GOOG), Amazon.com, Inc. (NASDAQ: AMZN), Apple Inc. (NASDAQ: AAPL), and possibly others.

In addition to the DOJ, the Federal Trade Commission (FTC) has also launched its own antitrust investigation into Facebook, with reports it is also looking at Amazon’s relationship with third-party sellers.

Outside the U.S., the Australian Competition and Consumer Commission, UK Competition and Markets Authority, and European Commissioner for Competition are all targeting at least one of the aforementioned companies. Investors should expect continued pressure on Big Tech until this regulatory push reaches a conclusion.

2020 Market Theme #3: Politically Driven Market Volatility

Political elections will always have some degree of economic consequence, but the upcoming 2020 U.S. presidential race could prove one of the most impactful market events in recent memory. 

By now, investors are entirely familiar with the “Trump Bump,” which followed the results of the 2016 election. Wall Street cheered the idea of having a business-friendly POTUS, and stocks have continued to rise through 2019 with Trump at the helm.

Of course, partisans could argue back and forth all day on who’s really responsible for the continued market boom and relative strength of the U.S. economy, but it’s safe to say there is at least some degree of favoritism coming from Wall Street within the current political climate.

Threats of Trump being prematurely removed from office, or simply being voted out, add a fair degree of risk to the stock market in 2020, particularly because of the opposition’s overarching economic stance. 

When American voters hit the ballots in November, they will effectively be choosing between socialist economic policy and capitalist economic policy. Wall Street is terrified of the former, as evidenced by their open disdain for candidates like Elizabeth Warren who have made it a point to rally against corporate power and influence.

If a socialist like Warren or Sanders ends up elected into the White House, the election will very likely be followed up by a market sell-off. That said, socialism is not the only political risk factor for stocks in 2020. 

Investors would be wise to remember that back in 2016, Hillary Clinton sent biotech stocks crumbling with a single tweet during her campaign. At the time, the sector was red-hot, but after Clinton complained about price gouging on her Twitter, vowing to stop it, biotech stocks got demolished.

Leading up to the 2020 election, even Trump has been railing against drug prices, making the sector particularly vulnerable to fear-based selling and volatility. The same could be true for Big Tech companies under fire from both sides of the aisle.

2020 Market Theme #4: Long-Promised Tech Finally Begins to Take Hold

As far as innovation goes, 2019 was a noticeably quiet year. For the past half-decade or so, we’ve been promised a long list of groundbreaking new technologies like virtual reality, self-driving cars, the Internet of Things, and so on. In 2019, though, expectations surrounding these innovations were brought down to earth as investors realized the future was just a bit further out than expected.

The good news for tech-minded investors is that in 2020, several of these long-promised technologies will finally begin to take hold, in part due to timing, but primarily due to the long-awaited global deployment of high-speed 5G networks.

As Sarah Ketterer, CEO of Causeway Capital Management, explains, “Advanced economies are on the doorstep of a 5G era of connectivity. Relative to the prior generation, 5G brings greater speed to move more data, lowers latency to boost responsiveness and connects a lot more devices.”

Up until 2020, limited cloud connectivity has kept a long list of emerging technologies at bay. Augmented/mixed reality, driverless cars, drone delivery, and the Internet of Things will all rely on ubiquitous and high-speed data transfer to operate efficiently. 

Without 5G, these technologies have widely stalled, but with it, the floodgates for a new wave of innovation will be wide open. Investors can expect technology deployments to accelerate in 2020, particularly toward the back end when 5G networks become widely available to corporations and consumers.

Until next time,

Jason Stutman

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