Investors may grow complacent and worry-free as markets end the year in the green in 2019. The strong economic growth in the year creates a new milestone: the U.S. will start and end the decade without being in a recession.
This accomplishment is unprecedented.
Per CNBC’s note that the economy expanded for 126 straight months, the assumption of more gains ahead will follow. So in 2020, investors have no reason to doubt the economy will still expand.
We will enter the year looking ahead to the U.S. election. And with politicians promising whatever it takes to win votes, expect business expansion continuing.
In the last few years, the U.S./China trade talk ended with tariffs on goods from both sides. This will help offset the massive deficit on the government’s balance sheet. Plus, the stock market appears fine over the added costs.
With stocks closing at all-time highs, markets do not believe any downtrend ahead.
Passive investors may continue holding the S&P 500 ETF (NYSE MKT:SPY). They may also look at energy ETFs, which is up 31% YTD (see the OIL ETF). Conversely, oil services (OIH ETF) is down by 5% this year.
Contrarian investors may want to increase their cash balance in anticipation of a small, temporary correction. Still, the market did not indicate anything negative yet so any drop appears unlikely in the near-term.
