Expect the Best but Prepare for the Worst in 2020, Analysts Warn

  • Analysts expect 2020 to be a relatively smooth year for the stock market despite many risks to their predictions.
  • The presidential election, the trade war and wage growth are among the largest risks to the market.
  • The strength of the U.S. housing market remains a subject of debate, but home prices look likely to level off in 2020.

The economic outlook for 2020 is unique, as it depends on several “what-if” scenarios. That’s made it difficult for analysts to take a firm position on where they see the U.S. housing market, the Dow Jones, and the economy heading. The result has been an echoing refrain among analysts:

Everything should work out, but there’s also a chance it wont. 

Morgan Stanley Uneasy About Trade War Risks

Analysts at Morgan Stanley see “calmer waters ahead” as trade tension dies down and the Fed maintains its accommodative policies. Chief Economist Chetan Ahya is optimistic about the global economy, saying that although the current economic expansion has persisted for over a decade, “interruptions” like the trade war with China and Europe’s debt crisis have extended the economic cycle. 2020 will probably continue that trend with another “mini-cycle recovery.”

Ahya and his team see average GDP growth in 2020 coming in at 3.2%. The majority of that growth isn’t expected to come from the U.S., but from emerging markets and potentially Europe. 

U.S. GDP growth is seen steady, but unimpressive. | Source: Morgan Stanley

In the United States, MS Chief U.S. Economic Ellen Zentner says the economy is “distinctly in the late-cycle phase of recovery.” GDP growth is seen at 1.8% in 2020, down from the 2.3% expected in 2019. 

Morgan Stanley is still advising investors to be defensive, though. Ahya cautioned that trade tension remains a huge risk to the global economy. If more tariffs are put in place, the result could be disastrous as central banks around the world have already used the majority of their tools leaving very…

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