The S&P 500 index has added about 25% since the beginning of the year - by the end of December, it may be the strongest growth since 2013. This was partly due to the US Federal Reserve's monetary easing, hopes for which helped the market recover from a 20% collapse in Q4 2018, as well as expectations of progress in the Washington and Beijing trade negotiations.
Many analysts are confident that the recovery will continue in 2020, but it will be more modest amid slow global economic growth, uncertainty in trade and the pause that central banks will take to assess the situation. The median value of already published forecasts indicates that the S&P 500 will reach 3241 points by the end of 2020, writes The Wall Street Journal (WSJ). This is 4.1% higher than the close of trading on December 4 (3112.8 points).
One of the most optimistic forecasts is that Credit Suisse will reach 3425 points (+10% by December 4). The bank analysts expect the companies' profits to grow and they will continue to buy back their shares. Credit Suisse strategist Jonathan Golub admits that he had previously advised customers not to buy risky assets, but three cuts in Fed interest rates this year and stabilization of some economic indicators in recent months forced the bank to "change the tone".
UBS analysts are pessimistic, believing that the S&P 500 could fall to 3000 points by the end of 2020. According to the UBS strategist Francois Train, the decline in the index is "non-negotiable" amid a decline in production activity and a slowdown in the U.S. economy. However, he gave one of the most pessimistic forecasts for 2019 as well, expecting a drop to 2550 points.
The world's largest hedge fund Bridgewater and put about $1.5 billion on the decline in indices by March, WSJ wrote in late November, citing people familiar with the situation. Bridgewater had been buying options for several months, which will allow it to earn if the S&P 500, or Euro Stoxx 50, or both indices fall. However, it is not known why the fund put about 1% of its assets on the fall, WSJ noted - according to some clients of the fund, perhaps, it only hedges large positions opened on the stock market.
Negative in the markets due to the slowdown of the world economy and trade wars peaked in September - October. At the very end of August, the value of bonds with a negative yield in the world reached $17 trillion, and in September, according to Trade Alert, the number of "put" options, allowing to earn on the fall of S & P 500, reached a maximum in more than four years. The level of fear once again served as a good counter indicator: in October, the S & P 500 came out of almost two years of sideways, and bond yields began to rise, the value of bonds with negative yields fell below $11 trillion.
Former "bond king" Bill Gross doubts that stock and bond markets will grow strongly again as the effect of fiscal and monetary stimulus in the U.S. is dwindling. In addition, central banks are now more cautious about the side effects of ultra-low rates, he said in an interview with the Financial Times. According to Gross, U.S. stock indices are unlikely to rise, and their decline may reach 10%, while the yield of 10-year treasury bonds in a year will be 1.75% (currently - 1.8%).
Presidential elections in the U.S. could lead to volatility of stocks in the health sector, said Gross. According to him, the political situation in the country is "unstable," as President Donald Trump continues to act "schizophrenically" day after day, and "Democrats rush between central and ultra-liberal candidates.
Morgan Stanley described in the report the investor sentiment with which his analysts communicated in different regions, presenting his forecast for 2020. Both the bank's experts and investors, in general, believe that the period of the global economic slowdown is coming to an end, and expect good growth of stock markets outside the U.S. "Better expectations of economic growth and cheaper stocks outside the U.S. mean that we prefer non-U.S. stocks to the U.S." - wrote the analysts of Morgan Stanley. With this in mind, most investors are more positive about Asia and emerging markets, but many also see growth opportunities in Europe. "Most expect limited growth S & P, but agree that expanding the balance of central banks may lead to growth above fair value," - noted in Morgan Stanley.
Low cost, high dividends and a change in the attitude of international investors should support the Russian market, said Sergei Sukhanov, CEO of Sova Capital, at the "Financial Forum of Russia," organized by Vedomosti on December 3: the ratio of capitalization to projected profits for the next 12 months, he has one of the lowest in the world - 6.1, and dividend yield - one of the highest (7.8%).