The Soaring Twenties: 10 Economic And Market Trends To Consider For 2020

A new decade has arrived! And with it, the Roaring Twenties of a century ago echo today. That’s because the past can teach us lessons. Consider F. Scott Fitzgerald’s wife, Zelda. She eloquently summarized the excesses and red-flags of the 1920’s. “We couldn't go on indefinitely being swept off our feet,” she noted in her 1932 semi-biographical book, Save Me The Waltz. The book was published at the height of the Great Depression that followed the Crash of 1929.

The Fitzgerald’s epitomized the rise and subsequent fall of those times. If the bubbly (or in today’s world, central bank stimulation) stops flowing, the party ends and the cold morning after begins. That’s why investors, business leaders and entrepreneurs alike should be prepared for turmoil.

It is true that in 2019, the S&P 500 rose by 28.9 %, capping a record decade of stock market gains. Even gold, arguably a slow and steady play, saw a boost of 18.7 % last year. However, this was largely due to the Federal Reserve’s stimulus throughout most of the decade, and its more accommodative turn during its final year. Major central banks around the world followed that lead.

Questions are building in the chambers of Wall Street. Can this bull market last? And what does 2020 hold in the weeks and months ahead? There’s no doubt that central bank policy will remain accommodative and money cheap on an international scale. This will boost the stock and bond markets.

Yet, prospects for real economic growth the world over remain shaky at best and at worst, mired in a cannon of debt, trade tensions and geopolitical risk waiting to blow. That does not mean it is time to start hiding cash under the mattress. But approaching the year ahead with cautious respect can mean a sober and profitable outcome. Below are 10 pivotal areas that could drastically impact the global economy and markets as we launch into the Soaring Twenties.

10 Market Trends to Consider for 2020

1. The Fed Will Keep Things Loose – For Now

The Federal Reserve’s current stance is to keep rates where they are. However, the Fed has also indicated that it will continue using its latest cheap money tool - the repo market - to ensure that money will flow where it needs to. The Fed has promised to inject $60 billion per month into the markets, a practice it started last September. Its balance sheet ballooned to nearly $4.1 trillion from $3.7 trillion to close out 2019. The Fed won’t call this process quantitative easing (QE) – but, rest assured - it is.  The Fed may not move rates for the first half of 2020, but it will keep money flowing, which should give the overall market a bullish bias.

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