Expect a Year of Moderate Gains, Ally Invest Strategist Says
Lindsey Bell sees economic gains accelerating on lower interest rates, and favors the technology and communication services sectors.
Kiplinger: What do you see ahead for stocks in 2020? I believe the bull market will reach its 11th birthday in March, but the magnitude of the gains will be keenly dependent on trade policy. For businesses to feel more confident and keep spending, we need a clear path to a resolution there. I don’t think 2020 will be another double-digit year for returns. But I think stocks could still see a price increase in the low- to mid-single-digit percentages.
What’s supporting stocks? I believe economic growth will improve throughout the year. The pickup will come from lower rates. They’ll stay low for quite a while, even if there is a tick up by a quarter point or so late in the year. That will be a benefit to an already strong consumer. Corporations have been dealing with tariffs for more than a year—this is becoming a new normal. Because of that, companies are spending money to reroute supply chains all around the world, and that will be a benefit in 2020.
Where should investors put their money now? Value-priced stocks have taken the reins from growth-oriented stocks. While investors recalibrate and truly come to believe that economic growth will accelerate, they’ll take advantage of value stocks—which are often the ones that see the biggest boost from an improved economy. Later in the year, however, you could see growth retake the reins.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Why is that? Economic uncertainty due to the election could drive investors to the old standby. Plus, look around the world. It’s becoming more digitally connected, especially in the U.S. Not just iPhones or computers and laptops, but your car, your house, industrial and health care companies—everyone is moving in that wave. This is leading to greater earnings increases in growth sectors than in value, making it difficult for investors to avoid those greater growth opportunities. I believe you’ll see growth return to favor by the second quarter or so.
So, you recommend technology stocks? Yes, tech and communication services.
What else do you like? I still feel confident in the U.S. consumer. We’re getting to a point where employers are complaining about their ability to find qualified workers. Employers will have to either pay up or offer programs to train and educate the current workforce to fill those jobs. In a period of consumer strength, I see another leg up for consumer discretionary—stocks of companies that make nonessential consumer goods. But you have to dig in and look at where consumers are actually spending money. I like homebuilders, restaurants, certain hotel and travel companies, and some retailers.
How will the election impact the market? Political risk is going to be heightened in 2020. You might see some trends that are not normal, historically. A key factor is who the Democratic candidate will be—that’s going to drive a lot of angst in the market. If it’s a very liberal nominee, you could see the financial, health care or energy sectors underperform going into the election—usually, energy and financials are among the better performers. Consumer staples and utilities should maintain their historic trend of outperforming. I think that tech and communication services stocks (which have historically underperformed, pre-election) can do well, even with the threat of regulation hanging over them. I’d be surprised if any regulatory legislation got through Congress in an election year.
What other portfolio moves should people be thinking about? Small- and mid-cap stocks may perform better in 2020. Lower interest rates and improving economic growth will benefit those sectors, as will an increased appetite for risk from investors in an improving economic environment. You still want significant exposure to the domestic economy, but having some exposure to emerging markets could benefit your portfolio in 2020. I would consider a broad indexed approach.
What are the big risks in 2020? One risk factor that doesn’t get talked about enough is government debt. National debt in the U.S. just keeps rising, and the government continues to increase budget deficits without focusing on cutting spending. We haven’t been fiscally responsible.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage, authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.
-
Election Could Reshape Opportunity Zones and 1031 Exchanges
Trump and Harris have divergent approaches to qualified opportunity zones and 1031 exchanges. See how each could fare under their administrations.
By Daniel Goodwin Published
-
Six Reasons to Have Life Insurance
The peace of mind from knowing your family is financially protected if something happens to you is invaluable, but there are other compelling reasons, too.
By Anthony Martin Published
-
China's Economy Faces Darkening Outlook
The Letter What the slowdown in China means for U.S. businesses.
By Rodrigo Sermeño Published
-
Should We Worry About the Slowing U.S. Economy
The Letter With the labor market cooling off and financial markets turning jittery, just how healthy is the economy right now?
By David Payne Published
-
Kiplinger Special: How Businesses Should Budget for 2025
Kiplinger Forecasts From fuel to AI software subscriptions, here's what you can expect to pay next year.
By John Miley Published
-
Intel Braces for an Even Tougher Road Ahead
The Kiplinger Letter Amid a long, costly turnaround, Intel resets expectations again. Its new woes raise questions about U.S. industrial policy and global chip competition.
By John Miley Published
-
Kiplinger Special: The Long-Term Future of the U.S. Economy
The Kiplinger Letter Kiplinger's report into what it will take the U.S. to maintain a healthy economic growth rate.
By David Payne Published
-
Fed Rate Cuts Still on Hold
The Kiplinger Letter With inflation stubbornly elevated, the Federal Reserve will keep interest rates high for now.
By David Payne Published
-
A Spotlight on the Pacific States: The Kiplinger Letter
The Kiplinger Letter Most Pacific states are seeing good job growth in multiple sectors including tourism, hospitality, and construction.
By David Payne Published
-
The Robots Are Coming... But Not For a While
The Kiplinger Letter There’s excitement in the tech sector over the potential of humanoid robots, but widespread adoption is likely to be years away.
By John Miley Published