The new year and new decade started, and good news: some things don’t change. Stocks picked up right where they left off in 2019 by touching all-time highs. And bonds, which also performed well in 2019, continue to hover near three-year highs, keeping home loan rates near 3-year lows.
Many are wondering how the economy and markets will perform in 2020. So, for that reason, here are 3 trends to follow:
- Don’t fight the Fed. As the saying goes, there doesn’t appear to be any chance of a Fed rate hike in 2020. The economy is strong, but not too strong. Plus, the Fed is fighting disinflation, so a rate hike would counter those efforts. Moreover, it’s a presidential election year and the Fed has historically tried it’s best to avoid any monetary policy moves in those years. Bottom line: good for stocks and less good for bonds.
- Stock gains. Post-World War II, stocks on average have gained 10.1% in presidential election years where the incumbent is up for re-election. It’s tough to fight that trend, even with stocks soaring in 2019. Bottom line: stocks are set to finish 2020 higher.
- $1,000,000,000,000. That was what the U.S. spent in holiday retail shopping in 2019. That massive record highlights the strength of the U.S. consumer who makes up 70% of the U.S. economy. Bottom line: there is no recession in sight, great news for housing and the overall economy.
Bottom line: absent of a Black Swan event or unforeseen negative surprise, 2020 is shaping up to be a great year for housing and the U.S. economy, with the labor market strong, wages rising, inflation muted, and interest rates low.
Forecast for the Week
This first full trading week of the new decade will be a little light on economic reports.
However, two key labor market reports will be released, and could be big market movers.
The ADP Private Payrolls gives us a read on private job creations, while Friday brings the government’s official Jobs Report.
The labor market remains one of the bright lights in the U.S. economy, with the unemployment rate at 50-year lows coupled with rising wages.
The markets will also keep one eye on the U.S.-China trade headlines along with any stimulus headlines from global central banks.
Reports to watch:
- The ISM Service Index will be reported on Tuesday.
- ADP Private Payrolls will be released on Wednesday followed by the government Jobs Report on Friday that includes Non-Farm Payroll, the Unemployment Rate, and Hourly Earnings.
- Weekly Initial Jobless Claims will be delivered on Thursday.