Despite all of the geopolitical events, things still look good for stocks next year with an incumbent running.
The potential for a decent trade truce with China, along with an economy that’s still growing and accommodative interest rates add up to a continuation of the bull market.
With the Stock Trader’s Almanac 2020 coming off the press this week here’s a little preview of some our analysis and outlook that’s in the 53rd Annual Edition.
Presidential incumbency is a powerful phenomenon and the driving force behind the 4-Year Presidential Election Cycle. This quadrennial quadrille is what has made the Pre-Election Year the best year of the cycle and Election Year second best. Since 1952 S&P 500 (NYSEARCA:SPY) is up 12.5% on average in election years when a sitting president is running for reelection vs. 6.7% in all election years and –1.5% in election years with an open field and no incumbent commander-in-chief running for a second term.
We are also arguably now experiencing some fiscal and monetary policy synchronicity. After several years of conflicting policy the Federal Reserve and the U.S. Federal government are finally getting in synch. Interest rates are historically low and the Fed has lowered rates again at the last three scheduled FOMC meetings at the same time as fiscal policy has been lowering taxes and increasing spending. These dual pro-growth policies should continue to propel the stock market higher.
Gains will of course not come without pause and correction. The world stage will continue to feature some challenging geopolitical, political, diplomatic, trade-related and economic storylines. U.S. presidential campaign politics will increasingly focus on domestic political disputes, standoffs and unfinished business – as well as impeachment proceedings. But when all is said and done, we expect 2020 to be a positive year based on the historical patterns and cycles and current favorable policies, healthy economics, and positive market behavior.