What are our analysts’ stock market predictions for 2020?

We asked us our analysts to provide their top stock market predictions for 2020. Here’s what they said:

European stocks are likely to rally in 2020 – Chris Beauchamp

A potential bottom in purchasing managers indices (PMIs), a European Central Bank (ECB) committed to loose monetary policy, and an easing of global trade tensions should help European stocks to continue their gains of 2019. Massive outflows from the space over the past few years have hurt performance, but 2019 saw the first stirrings of a real revival of investor enthusiasm. If the outflows reverse, the game of catch-up could take eurozone stocks to new highs. An intensification of US-EU trade wars would be the bearish case but, with the US election less than a year away, the US President Donald Trump’s sights will be on securing his re-election and less on starting a trade war with another major trading partner.

US indices likely to hit record highs in 2020 – Monte Safieddine

Trade talk and an announced trade deal was the catalyst for short term and momentum-based movement in overall share prices in 2019. But, in the background, central bank easing, and the injection of liquidity to snap up government bonds and force money into riskier assets has been the more long-term catalyst for movement. This could remain the case as we move into 2020 with central bank balance sheets continuing to balloon.

Global economic data has stabilised slightly as of late, but many indicators are still stuck in contracting territory and will need more than an enforced trade deal to break free; hence we should expect global economic data and earnings to remain tested in 2020. Optimism in terms of trade talk and a US-China phase one trade deal is the easiest of steps made, as even if a trade deal is struck between the strategic competitors, other non-economic factors could easily entice a break in that commitment and make any potential phase two deal questionable.

In all, with a lack of alternatives in other asset classes and newly injected liquidity searching for returns, fresh record highs are a likely scenario for US indices. However, any and all gains made are expected to be eventually undone. That would make breakout strategies in the short term more ideal with reversal strategies in place in the mid term.

Trade deal could reverse Yuan decline – Josh Mahony

After an arduous year filled with cliff edges and an attack on global trade, traders will hope for a more serene and positive year ahead. The impending conclusion of the first phase of the US-China trade deal has helped raise sentiment throughout global markets. However, the devil will be in the detail and, as a result, earnings season will take on a more important role than ever in the first half (H1).

While 2019 saw a 20% gain for the Dow Jones, that was also a function of the 20% decline seen in Q4 of 2018. Thus stock-market gains are likely to be more difficult to come by in the US, with the big question for markets centring around exactly whether the US-China deal will hold and what type of impact will it really make for US exporters. A successful deal should help provide upside for commodities such as copper and iron ore, while the huge yuan devaluation which started in Q1 2018 is also likely to reverse if trade barriers continue to come down to the benefit of Chinese growth.

In the UK, Prime Minister Boris Johnson’s decision to rule out an extension to the 2020 trade deal deadline will limit sterling gains and create a new cliff edge for markets to worry about. By prioritising a quick deal over a good deal, expectations of a huge sterling recovery have been quelled for the time being. The UK domestic picture is likely to improve over H1 as election and Brexit fears fade, with housebuilders expected to outperform as housing activity picks up. Elsewhere, gains for the primarily UK-focused banks are likely to be limited as we move towards the end of the year, with Johnson likely to run into difficulty securing an advantageous deal for the critical financial services sector.

Newmont Goldcorp could outperform the precious metal in 2020 – Shaun Murison

Gold served as good proxy for the ebb and flow of economic risk in 2019, with the trade war, Brexit and geopolitical uncertainty all playing a part in the fortunes of the precious metal. These are risks which are likely to remain in place as we enter the new year and the continued uncertainty surrounding them has the potential to serve as a future catalyst for the commodity, whose safe-haven status provides an investment hedge in the market place.

With the macro outlook unclear, gold shares remain an attractive option for those looking for some protection to an investment portfolio. As 2019 saw the merger of heavyweight gold counters Newmont and Goldcorp (now Newmont Goldcorp), which formed the world’s largest gold mining company in terms of production, capital gains in Newmont Goldcorp are expected to exaggerate gains in the underlying commodity (should they manifest). The group also trades at a valuation discount to its slightly larger peer (in terms of market cap) Barrick Gold, with whom the company now shares a large joint venture in Nevada (where there are an estimated 76 million ounces of gold). Newmont Goldcorp also offers investors the added kicker of a historical dividend yield of 1.41%.

Australian mining and energy stocks likely to rise in 2020 – Kyle Rodda

The story of financial markets in 2020 may well be a tale of two halves. Having run into a bit of a tailwind into the of end 2019, optimism is growing that something of a pick up in global economic activity is afoot. This has primarily been generated by a de-escalation in the US-China trade-war, and to a lesser extent, the prospect of a ‘smooth Brexit’. But on top of that, stimulus from policymakers across the globe, and especially in the US and China, stands to boost growth marginally in the first part of 2020, which, according to analyst’s forecasts, should drive a return to positive earnings growth in the US stock market, after several quarters of earnings contraction. Crucially, the risk that central bankers will step away from an accommodative monetary policy stance is low, with the US Federal Reserve (Fed) in particular realising how significant supporting financial asset prices is to the US, and ergo global, economy. At its essence, the first part of 2020 will show how much pent up demand exists in the global economy after an uncertain 2019, and to what extent this can lead to an uplift in economic growth. This is especially pertinent to global manufacturing, a recession in which has been at the core of softness in the global economy in 2019.

That narrative will probably play out in a three to six month cycle, which ought to support risk assets, and other growth sensitive markets. By the middle of the year, however, the mood and focus in the market will likely change, as traders prepare for a risk laden end to 2020. For starters, though US growth will probably remain solid, signals in 2019, like the US yield curve inversion in August, suggest a more meaningful slowdown is afoot in the medium term. Economic indicators like non-farm payrolls data and retail sales will probably show some signs of ‘late cycle’ behaviour. This will be compounded by what will probably be quite a rough-and-tumble US election campaign, which will probably weigh on business investment, hiring, and consumption in the US economy. On top of these risks to the US economy, the perennial issue of how China tackles the transformation in its economy will inspire some level of nervousness at stages in late 2020. And it would seem Brexit risks won’t entirely evaporate, as UK and EU policymakers battle it out to ensure a no-deal is avoided come the December. Overall, like this year, the markets will need to be supported by promises of further monetary policy easing from global central bankers, as well greater levels of stimulus from fiscal authorities.

As far as the Australian experience goes, there’ll be some push and pull factors driving its economy and financial markets. An uplift in global economic activity will provide some support to domestic growth and the stock market. Exports ought to be sustained by an uplift in demand for commodities, especially in iron ore, as Chinese policymakers attempt to stimulate industrial activity in the Middle Kingdom. That should pay benefits to the ASX200 and its mining and energy stocks. The domestic story in Australia will be slightly more negative, though, as embattled and indebted households refrain from spending the rate cuts and tax cuts delivered in 2019. For consumers in Australia, the early part of 2020 will still be about deleveraging, and this will affect aggregate demand in the economy. This dynamic will force the Reserve Bank of Australia (RBA) to cut interest rates again, with calls for fiscal support from the government only to grow louder. As the back end of the year approaches, quantitative easing (QE) will become a very serious topic of conversation, and the RBA will likely set the foundations for some sort of a QE program. This will keep pressure on the AUD/USD, despite slightly stronger global growth, but the ASX200 will probably benefit from a continued grind lower in risk free rates – with one possible headwind being the banks.

Asian stocks and indices set to benefit from a reduction in US-China trade tensions – Jingyi Pan

Despite the ups and downs in US-China trade relations through 2019, Asian equities have chalked up a relatively good year. The MSCI Asia Pacific ex-Japan index is holding on to double digit gains of approximately 13% as we pen this (in early December 2019). Likewise, stronger gains have been seen for Chinese indices such as the CSI 300. Others like the Hong Kong Hang Seng Index and Singapore’s Straits Times Index have managed to keep their heads above water even with domestic unrest for the former and external sector weakness across both.

Amid concerns surrounding US-China trade and global growth slowdown, Asian markets are nevertheless expected to power along into 2020. Valuations are mostly attractive across Asian markets, while at the same time return on equties (ROEs) could rise alongside the recovery in economic growth into 2020, with signs of stabilisation seen in the region going into the end of 2019 suggesting that the growth slowdown is bottoming out. There are some risks to the view given the apparent lack of middle ground between US and China as the two sides remain at work in sorting out their differences. Any re-escalation of the tariffs war or the carrying forth of the trade war to other fronts, such as financial, would jeopardise Asian markets’ performance. That said, the increased willingness to engage in talks had been encouraging and with accommodative global central banks such as the Fed staying vigilant, the expectation for H1 2020 is a positive one for Asia. Being selective amongst the markets, the likes of the blue-chip CSI 300 remains a favourite amongst Asian indices.