A guide for you to understand the important trends in the stock market trends for 2020.
Election headlines move the market
The election may be the biggest catalyst of the year for stocks. A victory by a liberal Democrat would be the worst-case scenario for the market given their aggressive regulation and tax proposals. A win by Joe Biden would likely be a modest negative for stocks, while a Trump victory would likely produce a little market reaction or trigger a modest relief rally.
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Money flow from bonds to stocks
The 10-year U.S. Treasury yield is currently 1.91%, and Wall Street allocation to bonds relative to stock market trends 2020 graph would likely be historically low by the end of the year. When this phenomenon has occurred other times throughout history, stock market trends for 2020 outperformed bonds 94% of the time over the following 12 months. In fact, the average outperformance was an impressive 23%. Investors will start returning to bonds when the 10-year yield hits 5%.
International economies outperform the U.S.
Bank of America economists are expecting the current stock market trends 2020 of U.S. economic growth outpacing much of the rest of the developed world will reverse at the end of year. Economists are projecting decelerating U.S. economic growth, while economic growth for the rest of the world picks up. Fund managers are currently overweight U.S. equities and underweight emerging markets, Europe and Japan, creating room for significant rotation. Policy clarity following a UK Brexit in January has triggered a relief rally in European stocks.
Trade war getting transition to tech war
The trade tensions with the Chinese has increased over the year as the elections are nearing. Bank of America said the next phase of the trade war is a technology war. In which trade disagreements and national security concerns have resulted in the U.S. and Europe lowering their dependence on China.
Rotation from growth and momentum to value
Growth stocks outperformed value stocks throughout the 2010s bull market, but Bank of America said 2020 may finally be the year value rules. It is forecasted 8% S&P 500 earnings per share growth and says earnings growth will capture the attention of professional money managers who are heavily overweight momentum trends in the stock market 2020.
The rise of the stakeholder
The shift from a shareholder mentality to a stakeholder mentality has picked up steam among investors in 2020. Environmental, social, and governance (ESG) considerations are not only about responsibility. But they also help reduce risk and set up long-term growth opportunities for investors.
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