Investing With Clarity™ Blog

Top 10 Stock Market Predictions for 2020

January 2, 2020 9:07:37 AM

Yes, it is once again that time of year! It is time for our Nepsis Top 10 Predictions for the Stock Market in 2020! Of course, to stay on track with our historical performance (and we all know past performance is NOT indicative of future performance!), we were once again 10 for 10 in our predictions for 2019.

Remember, past performance is not indicative of future performance! However, I do like our odds of going 10 for 10 once again in 2020!

You may be asking yourself, “Why does Nepsis do these annual predictions — especially these types of predictions?” The answer is simple. We live in a world that I believe has an addiction to prediction. We see day in and day out investors continue to make big investment decisions and mistakes as they listen to countless predictions, compare their portfolio to benchmarks without understanding how they work, and compare their portfolios to other portfolios without understanding how the returns were achieved and with what level of risk it took to achieve the returns.


My hope is that our predictions can provide a level of clarity and common sense for investors that will enhance their investment process, remind them of the perpetual industry noise that inundates them daily, and put a smile on their face.


We have been telling our clients for twenty-plus years to always expect a 20% correction at any time. Furthermore, if that correction happens when there is no recession, it has historically been proven to be a gift, and that is precisely what happened following the bottom on Christmas Eve of 2018, a banner year in 2019. The sad reality is that as of the writing of our column, a record amount of stock funds were sold in 2019 and moved to Cash and Bonds while the market soared. A major contributor to what turned out to be an exceptionally bad decision was the public’s reliance on useless predictions, which, at the end of the day, doesn’t help the investor make decisions while in the midst of all of the noise and fear.


The reality is, investing is A PROCESS over time! With the continued growth in computer based trading and the growth of Exchange Traded Funds, volatility of late has been at extreme levels. BUT have NO FEAR! Volatility CREATES opportunity to invest in great businesses OVER TIME!


Everyone knows that there is no crystal ball, but people readily latch on to a silver bullet or quick fix solution instead of being disciplined with their investment strategy. Let’s face it, there are a lot of people that love hearing predictions and, unfortunately, I believe many people focus more on predictions than they do on what they own and why they own it.


So, in an effort to keep our streak going, I will once again be making my bold predictions for 2020.


As I mentioned earlier, do investors really pay attention to see how accurate the experts’ predictions are? No, of course not! Therefore, I am going to make it easy for you and let you know how we have fared in our predictions since we started providing them in 2012.


In the eight years that we have been making predictions, we are 8 for 8! That’s right — we have been right on every single one! I realize that may be an absolute surprise for some, however, as you will see from the past predictions, we do not go very far out on a limb. Instead, we look at what should be common sense combined with many of the ideas investors seem to focus their efforts on. When all is said and done, when you are investing OVER TIME, it should be the investment philosophy and strategy that provides you with the confidence to stick to the investment process. Portfolio returns are relative to the risk taken. Additionally, as we tell our clients, you don’t make or lose money UNTIL investments are sold. Focus on the process and on achieving long-term goals, not on a short-term number.

2020 Stock Market Predictions!

  1. Most predictions on where the S&P 500 will end in 2020 (just like 2019) will be wrong with the potential consequences of investors piling in on overpriced assets and missing out on great companies on sale.
  2. Company stock prices, as well as the “stock market” will move up and down irrationally – as usual. Remember, you don’t invest in the “Stock Market”, you invest in businesses purchased through a “market”.
  3. Many investors will continue to attempt to time the market (just like 2019) and be wrong as a record $135 billion* came out of Stock-based Funds and ETFs and went into Cash and Bonds, thus missing one of the best years for stocks since the Great Recession. * Source: https://www.wsj.com/articles/investors-bail-on-stock-market-rally-fleeingfunds-at-record-pace-11575801002
  4. Focusing on short-term or historical performance will distract investors from making intelligent longterm investment decisions and focusing on their Financial Plan.
  5. Some investors will allow their emotions to get the best of them and make investment decisions emotionally as opposed to fundamentally.
  6. Stock market volatility will continue to scare investors and in turn, create great buying opportunities — like always! Yes, we took advantage of this massive pullback and volatility!
  7. Many investors will continue to focus on inaccurate portfolio comparisons with benchmarks focusing on fees and short-term performance vs the investment process – a symptom of poor investment Clarity.
  8. Investors will continue to be overdiversified in their portfolio and not properly asset allocated leaving their portfolios inefficient.
  9. Investors will continue to follow the headlines instead of the bottom line when making investment decisions. Just look at all of the 2019 headlines that predicted doom and recession!
  10. Investors will continue to have an unrealistic time horizon for their investments focusing more on shortterm pain vs long-term gain – The tragedy of a shortterm thinker.

 

Invest with Clarity®! — Mark Pearson

 


Mark Pearson

Mark Pearson

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