2020 Vision – Alpha Over Beta 2020 Stock Market Forecast – PT2

Hello Traders,

In the previous article, we published our 2020 market outlook stating some major market impacting factors such as :

  1. President Donald Trump.
  2. Technology.

In this article we would like to continue the discussion regarding what are the major factors that are going to impact the market in 2020:

3. The Fed. – The Federal Reserve has a tremendous effect on the market as it had for countless years, It control the US interest rates which have a direct effect on the markets.

In 2019 we started the year thinking there is going to be another rate hike but then ended up watching the fed cut rate 3 times

  • Jul 31, 2019 — 2.00–2.25
  • Sep 18, 2019 — 1.75–2.00
  • Oct 30, 2019 — 1.50–1.75

The rate cuts were a reaction to 2 strong forces :

    1. The US economy suffered an earning recession in 2019.
      Major, global companies saw earnings shrink because of shrinking demand from Europe and China , this fact worries the fed that did not want to see a downturn escalation in the earnings of the US companies and in order to boost economic activity and maintain stabilization, reduced it fund rate.
    2. President Trump- who bashed Jerome Powell (The Fed. Chairman) continuously provoking him to reduce rate, he even compared Jerome Powell to Chine as a negative impact to the US economy, the pressure amounted and the fed funds rate was cut for the second and third time, President Trump even threated to fire Jerome Powell despite the fact that he simply cant…it did not stop him at all, in any case, Mr. Trump is a major pressure source on Jerome Powell and the fed.

4. “Earnings Recession”

As you may observe in the image below the us economy had suffered in 2019 from a slower growth of earning, this does not mean that earning had declined , just that the speed at which earning had grown had slowed down, the media (who sells fear..) immediately dubbed it “Earnings Recession” but it’s not, just a slowdown.

https://www.macrotrends.net/1324/s-p-500-earnings-history

The Blue line is the S&P500
The Orange line is the S&P500 EPS

5. Traders complacency – this is a psychological factor, once the market starts to go up, the traders are building tension regarding “How high can it go?”, this tension is built and may explode at some time for a simple catalyst that has nothing to do with how important it is.

It happened so many times in the past because the human psyche is the same wherever you look, just take a peek at the end of 2018 which dropped 20% in market value with no apparent fundamental factor, just because the market reached new highs.

This phenomenon might happen again, an experienced trader would know how to recognize it, lower her head and wait for it to blow over.

2020 is going to be good for investors in the US stock market, Trading specialists know how to identify market opportunities and cherry-pick the right stocks before they become common knowledge,

If you wish to benefit from our cherry-picking of investment assets and equity, please check out alphaoverbet.net for further details,

Trade Safely,
Alon
[email protected]

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