5 Must-Buy Small-Cap Stocks For A Steady Rally In 2020

The year 2019 has seen decelerating global economic growth, depleting export levels, relaxing monetary policies and most importantly, the twists and turns in the Sino-US trade war. The probabilities of signing the Sino-US phase-one trade deal in early-January 2020 significantly boosted optimism among investors in December. 

In fact, all three major U.S. bourses are scaling new highs. The S&P 500 Index has rallied 28.6% in the year to date period. Moreover, NASDAQ composite and Dow Jones Industrial Average have surged 34.9% and 22.2%, respectively, in the same time frame. These apart, the Russell 2000 Index has gained 24.4% this year so far. The broader market uptrend should not show any signs of slowing down, at least in early 2020.

Let’s see what’s making the investment scenario for 2020 look attractive.

Fed’s Rate Cuts

After three rate reductions in 2019, the Federal Reserve put a hold on its interest rate policy on Dec 11. It also hinted at keeping interest rates intact next year unless there is any drastic change in the economic outlook. The central bank kept the benchmark interest rates within the 1.50-1.75% band.

Federal funds rate projections made in September have been lowered from 1.9%, 2.1% and 2.4% to 1.6%, 1.9% and 2.1% for 2020, 2021 and 2022, respectively. PCE inflation and real GDP estimates have been reaffirmed. Unemployment rate expectations have been lowered from 3.7%, 3.8% and 3.9% to 3.5%, 3.6% and 3.7% for 2020, 2021 and 2022.

Trade Deal Optimism

The world’s two largest economies, the United States and China, recently agreed on a phase-one trade deal. Within the trade pact, the United States has consented to lower its 15% tariff to 7.5% on about $120 billion worth of Chinese goods. The country has also suspended tariffs on roughly $160 billion of Chinese consumer goods, scheduled to be imposed on Dec 15. Moreover, China recently announced that it will trim tariffs on some imported products, starting 2020.

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