• The U.S. economy has returned to slower growth, but should avoid recession in 2020.

  • Overseas economies should see modest improvement as trade tensions ease.

  • The Fed may leave rates unchanged in 2020, but other central banks are still in easing mode.

  • Modest U.S. equity gains should be built on somewhat higher earnings rather than multiple expansion.

  • International equities should outperform in the long run, but will be challenged for as long as trade tensions persist.

  • Market volatility could be higher in an election year. Investors will need to be well diversified and should avoid letting how they feel about politics govern how they think about investing.



American football is, in its essence, a simple game. One side tries to maneuver the football down the field into the opponent’s end zone and the opponent tries to stop them from doing so. However, the strategy employed differs depending on where you are in the game. Early on, aggression is the keyword on both sides of the ball, as each team is willing to take risks to put points on the board. But later on, particularly when one team has racked up a lead, the tactics change. The leading team will run more and throw less on offense. On defense, instead of trying to sack the quarterback, you double-team the wide receivers and are willing to give up short yardage to avoid a long play against you.

How you should play the game depends upon where you are in the game.

Investors thinking about 2020 and beyond face similar strategic issues. Those who have participated in an almost 11-year bull market in stocks and a more than 38-year bull market in bonds have racked up substantial gains. However, starting from this point, considering both the current position of the U.S. economy and current valuations, returns should be lower and some more defensive strategies may need to be employed.

Having said this, we expect both the U.S. economy and the global economy to grow in 2020, with decelerating growth in the U.S. and faster growth overseas. With inflation and interest rates still very low, there should be potential for gains in equities in both the U.S. and overseas. Fixed income returns will be modest regardless of whether the next year brings small increases or decreases in long-term interest rates. Meanwhile, investors will need to adhere to fundamental investing principles both to control risk in a potentially more volatile environment and to take advantage of opportunities in recently less favored areas such as emerging market (EM) equities.

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