My Outlook For 2020, And Why You Should Ignore It

Summary

• In this article, I briefly discuss what I believe will be the key investment themes in 2020.
• Despite my expectations for lower returns vs. 2019 and the possibility of a pickup in volatility, I believe that forecasts can be vastly inaccurate.
• My preferred approach for the new year is to hold a diversified, multi-asset class portfolio that can perform well in nearly any environment.

The new year is upon us. Following an impressive 2019 in which stocks (SPY), treasuries (IEF)(TLT), gold (IAU), REITs (VNQ) and diversified commodities (PDBC) all ended the twelve-month period in the black, investors now wonder if 2020 will be nearly as good for risky assets as the past year has been.

Today, I briefly discuss what I believe will be the key investment themes in 2020. I then pull the rug from under my feet and explain why my (or anyone's) predictions about the future should be largely ignored by most investors - and what they could do instead to have a successful year.

Source: China Law Blog

Expect little monetary policy upside

It is nearly a consensus that the strong performance in virtually all asset classes in 2019 can be credited to an environment of high liquidity in the markets. If your portfolio has looked "strong to quite strong" in the past 12 months, the Federal Reserve and other central banks around the world probably deserve most of the credit for the outperformance.

But in what pertains to the direction of monetary policy, 2019 wasn't a quiet year at all. Despite the lack of meaningfully negative macroeconomic data, the Fed came under pressure to lower interest rates as the US-China trade war escalated. Chairman Jerome Powell and the rest of the board were the target of presidential fury for not being dovish enough, and the markets seemed to turn sour whenever the news of the day suggested a lack of support for rate cuts.

In the end, US central bank members must have been relieved when the fed funds rate was reduced by 25 bps for the last time in late October, and Mr. Powell was tactful enough to close the door to further action in monetary policy without impacting

Analyst’s Disclosure:I am/we are long IAU, PDBC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.