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Predictions: What You Can Expect In 2020

| January 29, 2020

By Kristi DeRycke, Registered Assistant 

January 2020 means the start of a new year and a new decade.  How will this affect us?   What world events will happen and what affect will they have on the markets. What should we invest in this year and what should we avoid?  Will we have a correction?  Will we have a bear market?  Will we have a recession? has a nice compilation of 2020 predictions with over 500 outlooks on the economy, politics, financial markets, the election, recession risk and similar topics.  Schroders expect equities to remain relatively strong while bond yields linger low in 2020.  Deutsche Bank Wealth Management was quoted as saying that large gains as seen in 2019 are not typically followed by large falls but more modest growth.   Barclays also stated that they expect modest gains.  Goldman Sachs predicts decent risky asset returns. Capital Economics agrees that risky investments like equities and REITs will do better than safe like government bonds but both will be weaker than in 2019. Columbia Threadneedle reports that neither equities nor bonds will produce a high return but they also don’t see a huge downturn. Bloomberg quoted Vanguard as stating a more challenging future for all investments and sees benefits of global fixed income and global equity.  Bank of America was reported to expect higher US yields.  Well Fargo said they recommend that people stay fully invested but adjust their risk level.  Principal Global Investors was noted to say that they didn’t see a recession in the next 12 months so there was no reason to take risk off the table.  When reading through the roughly 40 sources that reported on volatility, they all agreed that they expect a rough ride for 2020. 

So what do I think will happen in 2020…..drum roll….here it is.   The China deal will go through or it won’t.  We will either re-elect the current President or have a new Democratic President.  Aliens will either invade the earth or more than likely not really exist.    The markets will either go up or down…or up and down and up and down.  The one thing we can be certain of is that some unexpected political, world or environmental event will occur.  We just don’t know what it will be or the impact it will have on markets.   Warren Buffet, a well-known successful investor who is chairman and CEO of Berkshire Hathaway, stated “We've long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, Charlie (Vice Chairman of Berkshire Hathaway) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

So now what?  I am guessing that most of you reading this live in the Midwest or a similar climate.  We have serious weather changes.  The channel 9 weather forecaster will say it will snow 6 inches and channel 2 may say it will be only be a trace.  They may actually agree on a forecast stating trace to 6 inches.  That is why we stock up on ice melt, pack extra blankets in the vehicle in case we have car troubles and keep an ice scraper on hand.  We also put jumper cables in just in case and keep umbrellas stored somewhere near our house door.  We are used to being prepared for the unexpected. 

Planning for the unknown financial markets is really no different.  Set yourself up for any situation.  This is a great time of year to spend a couple hours on a Saturday morning with a cup of coffee preparing for the year. Where do you start?  Look at your accounts and figure what percentage you have in stocks and the amount in bonds.  Does is match how you feel your risk tolerance is?  How will you feel if the stock market goes down 10% to 20% which may match the 40 resources stated above that expect some volatility.  How will you feel if they are wrong about a small versus big downturn and you do lose 40% or 50% of that much money at this point in your life?  Will you be panicked worrying about your future or sit comfortably knowing that you don’t plan to retire for decades and can watch it go back up to current levels.  The recent long bull market may have put your balances out of whack.  Your stocks may have gone up significantly. The S&P increased over 28% in 2019 alone per  A portfolio that may have started as 60% stocks and 40% bonds could be now 80% stocks and 20% bonds.  This would be a significant change from where you wanted your risk to be.  Typically, although not always, stocks are inversely related to bonds.  That means when stocks goes down then bonds go up and vice versa.  This is why you want to keep a good mix of stocks and bonds for proper diversification. 

You can rebalance your own accounts by selling some of your stock positions and using the money to buy bonds.  Keep in mind that if your stocks or mutual funds are worth more than when you purchased them then you will have to pay capital gains taxes on non-qualified accounts (i.e. Individual and joint accounts).  You will pay a lower tax rate if you owned the equity for greater than 1 year.  Consider selling stocks that you have owned longer to rebalance versus something you bought last year.  If you are adjusting funds within a qualified account like an IRA or 401k, you will not be taxed on any growth when trading.  The money in these accounts grow tax deferred.  Make sure to adjust your future contributions through your investment website to better keep the balance that you want.  While you are in the website, check out your current contribution.  Make absolutely sure that you are contributing enough to get your full company match if it is in a 401k or similar plan.  Each company sets the match amount.  An example may be that they will match 50% of everything that you contribute up to 8%.  If you are not putting in enough to get the full match, you are leaving free money on the table.  However, I am sure your employer won’t mind. Consider also if you could increase your contribution to your future you by 1%or 2%.  You may not feel that difference but it can really add up over time.  Most plan websites offer a savings calculator that would show the projected value of the additional 1-2% over time.  If it doesn’t, there are several great savings calculators online including  If you ever feel in the future the extra amount was too much for you, it only takes a few minutes to go back in and adjust the % back down. 

That is really all it takes to keep yourself ready for whatever will happen in 2020.  We will be driving the unknown road with you.   On December 31, 2020 when you are sitting watching the ball drop or out on the town with a flute of champagne I hope that you will feel like your preparation was worth it and you are sitting primed to see what 2021 brings. 

Does this process seem overwhelming?  You don’t know where to start?  Do you still have questions on how to make sure you are at your risk level?  That is okay.  We are here to help. 

By Greg Johnson

Another year, another mystery.  As we roll into this calendar year we have much to be thankful for from 2019.  Strong equity markets have produced higher than normal returns for your accounts.  Volatility has continued to play a large part of our market environment and as Kristi states we fully expect it to continue.  Everything moves quickly today due to the technology we all have at our fingertips.  I completely agree with Kristi’s take that it is more important than ever to make sure you have a plan for your investments.  What goals do you have?  Where will money come from to pay for certain things?  What will you do in the event the market crashes?  Do you have your money positioned properly?  Have you re-balanced your account lately?  On and on we can go with questions for you to consider.  No one has the perfect answer, but its better to have prepared than to have not thought things through.  We continue to work with our clients in diversifying their risk through the utilization of certain products, not just balancing between stocks and bonds as more and more people are happier with a return of their money than a return on their money.  Take a good look at the goals you have for your money and make sure you have your accounts prepared for both good and bad outcomes in the year to come.  2020 will be an exciting year and I truly hope you have a plan of attack to help you reach your goals.  One thing is certain, no one knows exactly what’s going to happen, all you can do is act properly based on your goals and stay the course. 

Securities and investment advisory services offered through Royal Alliance Associates, Inc. (RAA), member FINRA/SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA. 1567 13th Street, Belle Plaine, IA 52208 Phone: 319-444-2255