Outlook 2020: 4 Important Questions to Ask

DEWITT, Mich. - Jan. 14, 2020 - PRLog -- What can investors expect in 2020? Here are four key questions regarding our outlook:

Will consumers keep spending?

Investors have been wondering if there will be a recession in 2020. Central to that view is whether consumer spending is showing any signs of fraying.

The consumer has been a resilient driver of this economic expansion. Trade tensions, slowing growth, political challenges, lackluster wage increases and sluggish business investment have all failed to put a dent in consumer spending.

On the plus side, the labor market, which is a key pillar of consumer strength, is healthy. Job gains are leveling off, but the unemployment rate is near historical lows, and wages are growing modestly but still above inflation. Interest rates are low, keeping the cost of credit affordable. All of this means consumers can likely keep spending even as overall economic growth slows in 2020.

Will interest rates go lower, or even negative, this year?

Currently, benchmark lending rates are below 2%. Investors will be closely following the Federal Reserve in 2020 for signs of a shift in policy that could raise or lower this rate even more.

Just how low rates will go will depend on how fast prices rise in the new year. Inflation below the Fed's target of 2% could signal more stimulus is needed. A pickup in inflation could suggest the Fed is likely to stay put or even raise rates in the near term. With the rest of the world slowing and global rates very low or even negative, even as rates fluctuate, they will likely stay within low ranges for some time to come.

What's in store for global growth?

Global growth slowed from 3.7% in 2017 to an estimated 3% in 2019. However, there is reason to expect growth to stabilize and then improve in 2020:

Improving trade relationships between the U.S. and China could be a catalyst for growth. Trade is important to global growth, accounting for about 60% of worldwide GDP. Reducing trade uncertainty could help reverse the slowdown in global trade and manufacturing over 2019.

How much will politics matter for the markets?

The presidential election will dominate headlines in 2020 as new candidates and policies rise to the forefront, while a looming impeachment process adds to the political uncertainty.

Our best advice to investors is this: Don't play politics with your portfolio. History shows that economic and corporate fundamentals matter more than politics.

We can help

Investing over the long term requires managing uncertainty rather than removing it. We recommend you prepare for normal market swings by staying diversified in quality investments and maintaining a mix of equities and bonds that's appropriate for your situation.