My 2020 Market Predictions

Dana Anspach

December 12, 2019

As a financial planner, my life is about projecting unknowns. I often tell clients the only thing I can guarantee is once we put the numbers on paper, they’re wrong. Life doesn’t work in a nice linear fashion the way projections do. But by using projections, we can establish a range of possible outcomes, and plan based on that range.

As many unknowns as there are, I realize when it comes to the financial markets and human behavior, there are some things that are quite certain. Human beings want to believe someone out there knows the future. Normally, I shy away from making predictions. My crystal ball doesn’t work that way. But… I took a look at it the other day, and these ten things became crystal clear. These things are consistent, and I can predict them every year. Here they are, my 2020 market predictions.

  1. A finance magazine will run a headline that says something like “10 Stocks to Buy Now.” Some of these stocks will go up, and some will go down. At the end of the year, maybe you beat the return you would have gotten on an index fund, and maybe you didn’t.
  2. A conservative financial radio host will tell you to buy gold now. Or bitcoin. Although neither gold nor bitcoin produce a good or service or pay interest or dividends, someone will be touting one or the other, or both, as the best investment you can make. If the past is any indication, during most years, they’re wrong.
  3. Some of you will invest in a Ponzi scheme. You may not find out for several years. Everyone wants to believe in great returns with no risk. Some unscrupulous person will find a way to package this fairy tale into a believable story, and many people will fall for it. Perhaps even some of you reading this article.
  4. The S&P 500 will go both up and down. That’s right folks. That’s what the stock market does. Despite how normal this is, the media will find a way to make it sensational, perhaps with a headline like “Dow has the longest 3-week winning streak in past ten years.”
  5. A financial article will explain why the market is overvalued. Many analysts believe the stock market is overvalued. They will write about this, but may not explain what form of P/E ratio they are using, how they define the “market,” and when, exactly, they expect it to correct itself. It will be nearly impossible to use this data to make a profit.
  6. A financial article will explain why the market is not overvalued. Many analysts believe the stock market is not overvalued. They will write about this, but may not explain what form of P/E ratio they are using, how they define the “market,” and when, exactly, they expect the positive returns to stall out. Buy and hold investors will like these articles.
  7. Single stock risk will continue to be one of the biggest risks faced by many corporate employees. Corporate executives across America will continue to refuse to diversify their concentrated stock positions. Instead of locking in a level of financial security for their families, they will leave their financial situation exposed to a tremendous downside risk that could cause a drastic change in lifestyle. If lucky, none will lose their fortunes but the more likely outcome is one or two well-known stocks will tank, and lives will be changed.
  8. Ageism will still exist. Layoffs will occur, and people in their late 50’s and early 60’s who had planned to work until their mid to late 60’s will have trouble replacing their income. Some will start consulting businesses, and some will be forced into early retirement and will downsize their lifestyle to accommodate the change.
  9. People will blame it on the government. Whether it be success or failure, this year, someone will attribute it to the current administration. It won’t matter whether the current administration had anything to do with it. Facts are irrelevant.
  10. Many 401(k) investors will continue to choose funds based on past returns. Although this is the worst way to pick investments, investors will continue to pick investments this way. Many will end up owning an undiversified mix of mutual funds that are likely to all go down at the same time. Most could have a better outcome by using an asset allocation approach that was based on their long-term goals instead of choosing based on what happened last year.

These aren’t the kind of bold, attention-grabbing market predictions that make the front page. They are the kind of predictions that can make you a better investor.

Written by Dana Anspach. This article was originally posted in 2017 on Huffington Post.