Will S&P 500 hit record highs this year again? - January 15, 2020

Will S&P 500 hit record highs this year again?

Just like in 2019, more and more analysts are saying that they expect a strong year for stocks. This is supported by federal bank policies and several historical factors. See what experts expect for 2020.

We have already posted about what we expect for this year on the stock markets and (just like last year) many other experts share our expectations. We have examined their opinions for this post.

Analysts expect further momentum

Independent financial research firm Longview Economics for example expects a 10-20% rise this year from S&P 500. They underline that lately “whenever the (Federal Reserve) has been expanding its balance sheet, the S&P 500 has been trending higher”, and with their interest rate cuts, they did exactly that.

(Although we’re not fond of the negative interest rates, they do provide stock markets a stimulus. See our latest post on the subject: Did the floodgate to negative interest rates brake?)

CNBC reported another optimistic expectation from another analyst. The $9 billion asset manager said that he’s expecting S&P 500 to reach 3,675 points, which is 13% up from its value now.

Historical data supports rally

Some historical data supports the 2020 rally too. Namely, when the first five days of a year show a positive return, S&P goes up 82% of the time. This year this happened, so that’s a positive sign. The whole of January might be more important, so we’ll have to wait and see how stocks perform this month.

S&P 500 return in first five days vs. the full year

Last year, however, is a good indicator too. In our post at the beginning of 2020, we noted that in most cases, when S&P 500 performed as good in 2019, it remained bullish another year. This supports the positive projection for 2020. Just like the fact that the years of presidential elections are also usually good for stocks.

Fluctuations are expected

This year, however, might not be as simple as the last one. Not only our own, but other analysts are warning about possible market fluctuations for this year. Longview Economics for example warned about this, and they underlined that although the main sentiment is still optimism on the markets, some are expecting bearish periods too. SeekingAlpha also wrote that this growth cannot go on forever and “at a minimum, we need a pause to refresh”.

We also believe that this is the case, so long-term thinking and diversification is well-advised this year. Not only stocks, but precious metals might be a good choice for any portfolio as it has already started the year strong. In our next post we will analyze what we can expect for the precious metal.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.