It’s been a surprisingly good year for Wall Street. Don’t bank on a repeat in 2020.
Despite relentless political turmoil in Washington — everything from President Trump’s trade war with China to his impeachment this week — stocks have steadily climbed this year, with the Dow, S&P 500 and Nasdaq hitting all-time highs Thursday.
But the historic rally that has driven the S&P a full 28 percent higher — its second-best year in two decades — is likely to slow its pace in the coming year despite continued optimism about the economic outlook, market strategists say.
“Although not a one-way street, we see the secular bull market continuing in the new year, with the indices rising by another 6 percent,” Peter Cardillo, chief market economist at Spartan Capital Securities, told The Post.
That’s a little less than half of the 13 percent annual gain the index has chalked up during the past decade.
Michael Arone, chief investment strategist at State Street Global Advisors, also expects a 6 percent gain for the S&P 500 in 2020. But he fears investors have already “priced in” such potential catalysts as the US-China trade deal and an acceleration of corporate growth.
“It would be a real challenge to repeat the great year we’re just now ending,” he said. “And though we’ll get some growth next year, it won’t be as much as many folks expect.”
That’s partly because this year kicked off in a climate of fear.
The S&P 500 took a 20 percent plunge between Sept. 20, 2018, and Dec. 24, 2018, as the Federal Reserve scared the markets with rate hikes and fears of a trade war had already surfaced.
The yield curve eventually added to those worries by flashing its biggest recession signal in more than 10 years. But anxiety has since eased, and the yield curve has risen to its highest level since November 2018.
A preliminary US-China trade deal shows promise — but not before the tension leading up to its “phase one” motivated the Fed to cut interest rates three times since August.
Yet plenty of risks remain, especially since record low interest rates have led to record debt.
That could dampen consumer spending — the economy’s major driver — in an election year in which Democratic candidates may threaten the lower taxes and lighter regulations ushered in by the current administration.
Likewise, continued trade tensions could affect employment, business spending and America’s agricultural sector.
“Trade news may continue to drive market swings in both directions — absent a comprehensive US-China trade deal,” Liz Ann Sonders, chief investment strategist at Charles Schwab, wrote in her market outlook for 2020.