2019 was a strong year for U.S. equity markets, and that strength is compelling investors to wonder whether this powerful ascent will translate into a down market in 2020. However, if statistics over the past 70 years hold true, this year is likely to produce healthy, if not stellar, gains. Dow Jones Market Data figures going back to 1950 indicate that the Dow Jones Industrial Average tends to climb 75% of the time, with an average return of about 8.9% in the following year, when it finishes the previous year with a return of at least 20%. For the S&P 500 and Nasdaq Composite indexes, the gains tend to be even richer than those of their blue-chip counterparts.

With a big rally on Jan. 2, the market looked like it would start off the New Year with a bang. But then, news hit that the U.S. had killed Iranian general Qassem Soleimani, and all those gains quickly disappeared. With U.S. stocks priced for perfection, the increase in Mideast tensions is a reminder of things that can scuttle growth and spark a recession. In light of that, there is widespread belief that this is an opportune time for investors to consider ways to lowering their risk appetite.

Future Wealth’s View

Contrary to popular beliefs, given that our client portfolios had been heavily tilted in defensive investments all of 2019, we, at Future Wealth, believe this may be time to take a slightly more aggressive position. Our reasons are more fundamental than responding to every global event like the Mideast tensions. Firstly, we believe that the Fed has done a phenomenal job (contrary to Trump’s view of the Fed) and has been instrumental in preventing a recession in 2019 and has convinced us that they have the pulse of the US and the global economy going forward. Secondly, solid economic indicators – low unemployment, low interest rates and high consumer confidence should carry through 2020. Finally, corporate earnings and economic growth is likely to improve with the fears of trade war with China and Brexit fading into the background.

That brings us to the elections later this year. While it is anyone’s guess who is going to win (no points for guessing who we do not want for four more years), there’s typically less uncertainty when an incumbent is in office and is running for a second term. Furthermore, Trump is likely to roll out new policies or push for lower taxes in an effort to bolster the U.S. economy, which should provide further upside in the stock market.