Investors have had a great run in the stock market in 2019. Gains have been strong across the board, and fears for recession and global slowdown have failed to materialize.
Investors looking ahead to next year can take some confidence from positive signals today. Although nothing is ever guaranteed in stocks, there are signs to show that the bull market will still be running in 2020.
Strong Growth in 2019
Looking at the year to date figures, 2019’s stock market has been one of the best in recent memory.
- The NASDAQ Composite Index (COMP) is up 31.20%
- The S&P 500 Index (SPX) is up 25.80%
- The Dow Jones Industrial Average (DJIA) is up 20.73%
It’s not just the big stocks that have been growing. There’s strong movement in the small cap market, providing returns to even the bargain-hunting alternative investors.
- The S&P Small Cap 600 Index (SML) is up 18.35%
- The Russel 2000 Index (RUT) is up 21.17%
Investors will be hoping to see strong gains through the end of the year and into 2020. If we look at some key market signals, the future is positive.
Why the Market is Likely to be Strong in 2020
GDP is still growing, and that’s great news for any investor that is worried about a recession on the horizon. The Federal Reserve has maintained a conservative money rate policy, which has helped to sustain the economy. Foreign central banks have been more aggressive in their rate cuts, which has helped to keep a global recession far away on the horizon.
Consumer spending is strong, thanks to record low unemployment and growing wages. Lower wage workers saw a 5% wage increase this quarter, which could be a boon for retailers during the holiday shopping season.
Earnings growth is another factor that is driving confidence, and it should continue to do so next year. A few quarters ago, it was common to see companies with double-digit earnings growth. In 2020, corporate earnings could fall into the single digits, but even some slower rates of growth could keep many investors engaged in the stock market.
Finally, there’s positive news on trade. Despite President Trump angering China by signing a law in support of Hong Kong protestors, the reports out of Washington indicate that a Phase One deal is ready to be signed. Removing tariff fears from the market could lead to strong gains in the first quarter of next year.
Now Is a Great Time to Be a Stock Market Investor
With strong gains throughout 2019, and with no major corrections or prolonged slides, it has been one of the best years to invest in the stock market. With positive signals for the year ahead, the bull wave could continue well beyond the current quarter.
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