In 2019, the stock markets hit record highs, unemployment reached near-record lows, and consumers felt a renewed sense of confidence in the economy as worries about a coming recession faded away. And some experts expect the economy to keep roaring along, though perhaps at a slower pace.
"It's hard to see how things get much better," Emily Roland, a co-chief investment strategist at John Hancock Investment Management, told members of the media during the company's recent 2020 outlook event in New York. "There's this idea of everything being awesome right now," she added. "We're sitting here near these all-time highs, and volatility has been low."
Other economists concur. The market has a lot of "year-over-year positive momentum," says Scott Colbert, chief economist at Missouri-based Commerce Trust Company, who also expects the bull market to continue and stocks to keep rising into 2020.
So far in 2019, the S&P 500 Index is up roughly 30% — well above the historical average of 10%.
That said, both Colbert and Roland do expect the economy to slow down a bit. They recommend that everyday investors stick to a strategy of investing early, often, and for the long term while also keeping an eye on the markets.
While the markets have been on a tear for more than a decade now, it's important to remember that the economy still has some underlying issues that can affect the markets. For example, despite low unemployment numbers and strong markets, half of U.S. workers did not see any sort of increase in pay last year, according to a recent survey from Bankrate.
"The disconnect between the economy and the financial markets can be huge," says Colbert, who stresses that investors pay attention to moves by the Fed, along with other indicators to ensure they're making smart money moves.
Video by David Fang
Matthew Miskin, Roland's co-chief investment strategist at John Hancock Investment Management told reporters that there are three primary things that they and other investment pros will be watching in 2020 to guide their decisions:
1. Jobs reports: Traders look to these monthly reports from the U.S. Bureau of Labor Statistics as a sign of how businesses are faring — optimistic employers will likely be hiring employees, for example, while businesses that are hurting would be laying workers off.
2. Earnings reports: Quarterly reports released by public companies outlining performance indicate whether firms are making money and earning investors a return. Good reports may spur further investment while a bad report can cause investors to sell.
3. Consumer sentiment: Consumer opinions influence this indicator of economic health, which is generally measured using the Consumer Confidence Index (CCI) and the Michigan Consumer Sentiment Index (MCSI). When consumers are confident in the economy, they are more likely to spend money (increasing revenues for businesses), whereas when sentiment is low, they're more likely to save.
Of the three indicators, Miskin says that most experts will be keeping an eye on jobs reports, as those tend to carry the most weight with traders. Jobs reports are the "tell-tale sign of where we're headed," he says, because those reports can give an indication of how employers are feeling about the economy.
Overall, though, financial experts feel confident that the economy will continue to grow in 2020 and that the stock market will as well — albeit not at such an explosive pace.
Everyday investors should feel good but focus on a long-term strategy: Continuously investing in a diversified mix of holdings, and maintaining a balanced portfolio that will help keep you on track to meet your goals.
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