Raymond James' 10 Themes for 2020
By: Cameron Diehl, CFP®
Friends – Happy New Year! To kickoff 2020, I wanted to share some highlights from Raymond James’ “10 Themes for 2020” from our excellent Chief Investment Officer, Larry Adam. The team’s 2019 list proved extremely prescient with ~90% of their ten themes proving accurate. Given markets’ strong run over the past 12+ months as well as the upcoming election, many investors are asking what’s next in regard to their investments. The points below provide a great framework to guide conversations in 2020.
- Economy: US economic growth is expected to remain relatively robust with only a small probability of recession over the next 12 months.
- Central Banks: As inflation remains below the Fed’s 2% target, Fed policy should remain accommodative for future economic activity.
- Politics: Major policy changes will be unlikely if Congress remains split, which is our base case. Early indicators for the potential presidential winner are the unemployment rate and three-month pre-election performance of the equity market.
- Fixed Income: 10-year Treasury yields should remain below 2% for the next 12 months on the back of declining inflation expectations, increasing global demand, and favorable demographic conditions. We continue to favor investment-grade and emerging market bonds over high-yield bonds.
- Equities: Continued economic growth, solid earnings, fair valuations, healthy corporate activity (dividend and buyback growth), and low interest rates support equities. Earnings will be the primary driver of equity prices. Selectivity remains critical.
- Equity Sectors: Our favorite sectors include Technology, Financials, Industrials, Communication Services, and Health Care.
- 5G: The transition from 4G to 5G is the biggest enhancement in wireless technology in a decade, so our farsights believe this will be a multi-year catalyst for everything from semiconductors to phone carriers.
- International Equities: Internationally, we are neutral the US versus other developed markets. However, we maintain our long-term preference for emerging market equities based on superior growth, demographics, and potential benefits from the trade detente.
- Dollar & Commodities: The dollar is likely to stabilize and decline slightly over the next twelve months. Oil should continue to grind higher as global demand continues to grow in the face of reduced production growth by US oil producers.
- Market Volatility: We expect volatility to be elevated over the next 12 months as we move through the latter stages of the business cycle and the 2020 election. Asset allocation remains critical to portfolio performance. Investors should maintain their long-term investment strategies.
You can see Larry’s full presentation here. If you’d like to discuss how these themes relate to your personal planning, let’s connect. I’m happy to help.
