Displaying items by tag: S&P 500

(New York)

Despite all the worries that plagued the market this year, things have actually been very strong. Exceedingly so. But don’t expect that any longer, says Blackrock. The world’s largest asset manager expects returns in 2020 to come way down. The firm says that the big changes in monetary policy this year outweighed the geopolitical issues and caused huge returns, which won’t happen next year. Blackrock thinks returns in the mid single digits in 2020 seem realistic.

FINSUM: This is sort of a middle of the road call in terms of forecasted numbers, but we like the summary of what happened this year and how next year’s performance is not likely to be duplicated.

(Chicago)

Small cap stocks are starting to have their day in the sun. The Russell 200 has started to catch up to large cap indexes this autumn, and some stocks look ready to surge. The index is now up 21.2% for the year, just a few points behind the S&P 500’s 25.5%. According to Merrill Lynch, economic recoveries “tend to be the best phase for small-caps …That’s one key reason we think we could be poised for a shift from large to small”. According to a Jefferies analyst, “I think small is primed to outperform as the economy and earnings improve in 2020 … That’s going to be the whole ballgame”.

FINSUM: It is hard to imagine the US is going to enter an “economic recovery phase” at the end of a ten-year bull run, but the market’s perception of the current economy is exactly that, so these forecasts might be spot on.

(New York)

One asset manager called last year’s fourth quarter stock rout perfectly, and they are doubling down, saying it will happen again this year. Principal Global Investors’ Seema Shah says that stocks are facing another imminent selloff if the US and China can’t get a trade deal done before the December 15th tariff deadline. “If that trade deal doesn’t happen and if everything falls apart and it feels like tensions are getting worse, then I think we are facing a potential repeat of last year, and it will be worse”, said Shah. She says that the shock could be even bigger than in other parts of the year because of how liquidity disappears in December.

FINSUM: So we are dubious on this call, but what is interesting to us is that this argument was published on November 28th, and since then Trump has backtracked on the trade deal timeline.

(New York)

Analysts from across the Street have now put their predictions in for 2020, and the outlook is not as rosy as one would expect from a bunch of analysts who get paid to be bullish. The consensus outlook for equities can best be described as “meeehhh”. Morgan Stanley, UBS, and Stifel are forecasting that the S&P 500 will fall next year, while Citi, BAML, and Goldman are forecasting rises, but modest ones (single digits at the high end). Taken as an average, analysts think stocks will rise just 3% next year.

FINSUM: A published 3% forecasted rise by Wall Street research analysts feels more like they are expecting a 10% loss.

(New York)

It is not going to be a huge crash, but Morgan Stanley thinks US stocks will struggle in 2020. The bank thinks the US is clearly “late-cycle” and that its growth will wane from 2.3% to 1.8% next year. It believes the Dollar will weaken and stocks will struggle. The bank thinks most of the benefits of the Fed’s rate cuts have already been priced into the market. “In 2020, the economy will grow more slowly as the bulk of the positive lift from lower interest rates will have been absorbed and households balance higher income with higher prices from tariff”, says Morgan Stanley. The bank says emerging markets are likely to outperform.

FINSUM: Of all the forecasts we have seen lately, this one seems the most realistic. We don’t see a big bust coming, but a plateau seems very believable.