The Iranian Attack and A Stock Market prediction for 2020

The Iranian Attack and A Stock Market prediction for 2020

It’s that time of year again. No, not just for resolutions but for trying to figure out where to invest your money in the new year.

Investors love their barometers and metaphors. For instance, we just finished the so-called “Santa Clause rally” period barometer, which was very good, and now entering the “January Barometer” which prompts the metaphor, “So goes January, so goes the market”.

There are actually several January barometers. Some say the first 3 days are most important, while others say it’s five. However, most agree that if the entire month is positive, the year should be a good one.

We did have a nice rally to a record on the first day of trading for 2020, which is a very good sign. If the rally extends to the next four sessions, the market should be in for another banner year going by an old Wall Street indicator.

According to the Stock Trader’s Almanac and CNBC calculations, which studied the “first five days” phenomenon going back to 1950 – when stocks finish that period higher, the S&P 500 has been positive 82% of the time at year-end with an average gain of 13.6%., according to Stock Trader’s Almanac and CNBC calculations.

Of course, political situations do arise that can derail the direction of stocks in the short term either way. The killing of the top Iranian military commander by a UD drone is certainly shaking the markets. The fact that it happened on a Friday doesn’t help because investors are always jittery when news hits ahead of a weekend where the markets are closed. However, we will likely learn that there was a valid reason for the attack where American lives were at stake, calming markets and allowing stock prices to go back to focusing on the country’s economic condition.

The stock market performance for the last few years is quite easy to understand now in hindsight. 2018 was a bad year, especially at the end because it was forecasting a recession in 2019. We actually got a small recession last year, but it was much less than feared. 2019 was a good year for investors as it believed that we would see a manufacturing and earnings recovery, which we are.

So what does 2020 look like?

Goldman Sachs just recently had this to say about the economy: “Overall, the changes underlying the Great Moderation appear intact, and we see the economy as structurally less recession-prone today,” Goldman economists Jan Hatzius and David Mericle wrote. “While new risks could emerge, none of the main sources of recent recessions — oil shocks, inflationary overheating, and financial imbalances — seem too concerning for now. As a result, the prospects for a soft landing look better than widely thought.”

Given this strong bill of health from one of the best investment banks on Wall Street, along with the fact that the economy is getting stronger, I would say the stock market destined for another good year.

Naturally, there will be volatility this year, often times severe and I would expect a scary 10% correction at some point….so be ready but without panic.

Of course, significant risks are more present than ever with stocks at these levels and investors, especially those in retirement or the retirement red-zone must approach investing their nest egg cautiously. After all, this money cannot be replaced this late in life.

For a free consultation on solidifying your retirement master plan and investing tactically so you can get the best returns with the least risk possible, give us a call today.

“Invest for need, not for greed!™”

Cheers -Keith
916-925-8900

Smart Money Newsletter

Written By: Keith Springer

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