Broker Check

Outlook 2020: Bringing Markets Into Focus

     

At LPL Research, as we look forward to the year 2020 and a new decade, some key trends and market signals will be important to watch, including progress on U.S.-China trade discussions, an encouraging outlook from corporate America, and continued strength in consumer spending. Trade risk, slower global growth, and the impeachment inquiry have garnered a lot of the headlines recently, but behind the scenes the U.S. economy has remained resilient. Economic data has been meeting lowered expectations, indicating an expansion that is still enduring. Most recently, third quarter economic growth was consistent with the long-term trend of this current economic expansion, which is now more than 10 years old.

Economy.

DOMESTIC: We are expecting 1.75% U.S. GDP growth in 2020. Our forecast reflects the potential for continued trade uncertainty and weak business investment, but a steady consumer.

GLOBAL: Europe and Japan continue to struggle with trade uncertainty, geopolitical concerns, and sluggish growth. We anticipate more opportunities for growth in emerging markets’ economies, with countries outside China playing a growing role.

INFLATION: Consumer inflation has picked up slightly, and we believe inflation will continue to grow at a healthy but manageable rate.

EMPLOYMENT: U.S. job growth has been steady, although recently it has started to show signs of moderating. Some cooling down would be expected at this point in the economic cycle.

RECESSION: Prolonged trade uncertainty and a potentially rancorous U.S. election season lead us to believe that recession starting in the fourth quarter of 2020 or first quarter of 2021 could be possible, but we don’t think it’s probable. 

Bonds. Short-lived and shallow yield curve inversions are not worrisome in our view, and we continue to emphasize a blend of high-quality intermediate bonds in tactically oriented portfolios.

Stocks. We look for solid U.S. equities performance to continue, and we see more potential upside in emerging markets than developed international markets. We continue to prefer cyclical sectors for appropriate strategies as the U.S. economic expansion endures, and a balance of growth and value styles.

 

View the digital version of the LPL Research Outlook 2020: Bringing Markets into Focus for stocks, bonds and the economy, as your guide for the upcoming year.