The 10-year-old bull market in stocks is likely to rage on in 2020, say most Wall Street strategists.
“I suspect the S&P 500 will end the year 10% to 12% higher than we are today,” Invesco global markets strategist Brian Levitt said on Yahoo Finance’s “The First Trade.” “I am not expecting this to be a year where we are up 20%, 30%, but this is a year where markets should continue to move higher — and I would say the risk to that outlook is probably higher.”
Levitt’s call would put the S&P 500 at about 3,600 by year-end, compared to 3,200 or so today. He adds the Dow Jones Industrial Average could hit 35,000, which would mark an impressive 22% rally from current levels.
Levitt said a combination of sustained low interest rates and modest economic growth in the U.S. will continue to serve as gas to red-hot stock markets. Investors are unlikely to begin pricing in election risk until closer to the big day in November, Levitt said, echoing views from other sources Yahoo Finance has talked with of late.
At the very least, stock markets look poised to kick off 2020 right where they left off based, in part, on momentum. All three major equity indices touched all-time highs on Thursday as investors put money to work, likely fearful of under-performing to start the next decade. Rallies continued in some of 2019’s best-performing names such as Apple (AAPL), Advanced Micro Devices (AMD) and Alibaba (BABA).
Seasonality is in favor of investors right now, too.
The S&P 500 posts gains 63.7% of the time in January, based on historical data compiled by S&P Global strategist Howard Silverblatt. The average gain for the S&P 500 for up months in January is 4.2% and a 3.96% decline for down months. Overall gains for the S&P 500 in the month of January averages 1.24%.
Typically, a solid start to trade in January bodes well for markets for the balance of the year, a phenomenon known as the January Barometer. Silverblatt’s data notes the January Barometer has been correct 71.4% of the time.
Despite the enthusiasm permeating Wall Street at the moment, not everyone is running up and down the street wearing rose-colored glasses. With stock valuations above historical averages and a host of political risks coming to light soon, some strategists think a pause in stocks is approaching.
“Yes, [the stock market] can still go higher…maybe even a lot higher. However, investors are going to have to remain very nimble,” said Miller Tabak strategist Matt Maley. “Remember, even during the bubble that inflated during the second half of the 1990s saw several corrections. In fact, there were four corrections of 10%-19% over the last three years of that bubble.”