We’re nearly into 2020, so it’s prediction season for what’s going to happen next year.
There are various things that are on investors’ minds that could have a large effect on the market one way or the other. Here are some of my predictions that may be surprising:
Trade wars to be (temporarily) sorted
The trade war between the US and China has been one of the biggest negatives for the global share market over the past couple of years. There are plenty of people in the US and economists who think it was, and is, a bad idea.
Getting a deal done could be something to boast about for Trump. Indeed, ‘deals’ are Trump’s thing. If any sort of deal is agreed, even if it doesn’t fix any of the original issues, it would be beneficial for Trump politically – so I think the US is quite motivated to get something done. If it weren’t for Hong Kong we may already have seen a deal agreed.
Shares like BHP Group Ltd (ASX: BHP), Amcor Limited (ASX: AMC) and many other global trade focused ASX shares could get a boost in that scenario. However, I think the US will have to deal with the rise of China for the rest of this century, not just with a short-term trade agreement.
The US has just finalised an amended trade deal with Mexico and Canada.
RBA to decrease rates further
The RBA seems to be shouldering all the responsibility of trying to get the economy moving again. Interest rates have already been driven down to 0.75%. I think interest rates are too low already, but I fear they will go even lower.
I don’t think Australia will see a 0% interest rate, but I think it’s very likely that we will see a cut to 0.5% at some point during the year.
Another interest rate cut would be bad news for banks like Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).
Trump to do better than expected in the election
If you haven’t been following all the US politics then that’s probably been a good thing! There has been a lot to unpack with Trump, Russia and Ukraine. Opinion polls have been going against Trump and he seems very likely to be impeached (but unlikely to be removed).
However, the domestic US economy is performing extremely strongly. There are plenty of issues about healthcare affordability, student debt and so on which are worthy election points. But, Trump can point to the economy as his biggest selling point compared to the (shorter-term) risk of what may happen under Warren or Sanders. Stability can win elections, just look what happened here even though Labor was expected to win.
It depends on who the Democrats choose for their candidate. I do think that Trump is less likely to win, but I don’t think it will be as clear as some expect.
Negative interest rates to subside
One of the craziest things from this economic period after the GFC has been negative interest rates in Europe.
But, banks and governments are starting to push back against negative rates. I think the region will raise rates a little, whether that’s by central banks or by the commercial banks themselves charging higher rates or fees to customers.
The US election will definitely have the biggest sway over what the market achieves by the end of 2020. I think another RBA cut is the most likely of my predictions.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. The Motley Fool Australia has recommended Amcor Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019