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After last year's global market rally and three interest rate cuts by the Federal Reserve, how will the economy and financial markets perform in 2020?
Mainebiz put that question to experts at four wealth management firms — two of which are based in Portland, and two of which are based elsewhere but with offices in Maine's largest city and with a large client base in the state — for their outlook. Here's what they told us.
David Robinson, senior financial adviser and managing member, Robinson Smith Wealth Advisors LLP: Continued positive outlook
“Corporate earnings look solid for now, and central banks across the world lean toward pro-growth monetary policies. The U.S. Fed has paused but will lower rates again if the economy starts to falter. It's essential that investors not become complacent, that they make sure their investment strategy is appropriate for their individual situation and that it is ‘all-weather’ sound. Forecasting the future is difficult, to say the least, and I'll take a sensible investment strategy any time over a crystal ball that could malfunction when most needed.”
Jessamyn Norton, chief investment officer, Spinnaker Trust: U.S repo rate among worries
“Nearly all asset classes begin 2020 with over-optimistic investor sentiment and full valuations. While 2019 broadly saw investor flows into bonds rather than equities, this reversed course in November in an end-of-the-year pivot into risk assets. Our list of worries includes the repo rate in the U.S., the economic cycle in China, a spike higher in inflation, contracting profit margins and share buy-backs, worsening hiring and jobs’ data and, of course, developments related to the U.S. presidential election. This past decade coming out of the global financial crisis was the only one in market history in which the unemployment rate fell each year and that did not have a recessionary period. That will certainly not be the case for the coming decade; however, we do not believe that there will be a recession in 2020. On the contrary, we expect global economic data and corporate earnings to improve thanks to a weakening U.S. dollar, a peak in trade tensions with China and the steady accommodation of global central banks. “
"We believe overall economic growth in 2020 is likely to be slower than 2019, but still positive. Under the surface, we expect significant investment opportunities to appear in 2020 as the political cycle drives greater volatility and market rotation. While the risk of recession has declined, we still believe we are in the later stages of the business cycle, which is consistent with the flat yield curve and unusually low unemployment rate. However, the late stages of the business cycle could stretch on for years in a slow-motion, elongated fashion similar to the rest of this business cycle. Fiscal and monetary stimulus are likely to continue and increase the probability of this outcome. We remain cautiously optimistic on the prospects for the economy in 2020 for the moment, but with significantly less optimism for historical average returns across financial markets."
“As we begin 2020, there are a number of signs that suggest the U.S. is in the latter stages of an economic expansion that started over
10 years ago. The additional uncertainty raised as a result of trade and politics increases the potential for volatility. Yet we all know that market sentiment can be very fickle and is notoriously hard to predict. At Boston Financial Management, we strive to build portfolios of companies with attractive economics — companies that have a demonstrated history of stable and growing cash flow, high returns on investment capital, lower leverage and competitive advantages that suggest sustainable profitability well into the future.”
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