This column is my opinion and expresses my views. Those views can change at a moments notice when the market changes. I am not right all the time and I do not expect to be. I disclose all my positions clearly listed on the page, and I do not trade my account on the stocks spoken of in this column unless fully disclosed. If that does not work for you stop reading and close the page. Do not bother me or harass me.
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2019 is coming a close, and now as we turn towards next year, I present to you a list of 10 stock market predictions for 2020. You can review my list of top 10 predictions for previous years 2016, 2017, 2018, and 2019 to see how I did.
As I did last year, I will start with number 10 and work our way up to number 1 over the final month of 2019. Enjoy!
Prediction 4: The Reflation Trade Will Lead Stocks Higher In 2020
With global growth returning, the U.S. economy surging to a 3% growth rate, U.S. rates on the rise, the U.S. dollar sinking, the return of inflation, and commodities prices soaring, investors will heavily rotate into a reflation trade meaning, materials, industrials, energy, and financials stock will be among the best performing sectors in 2020.
If 2019 was the year for taking on risk, then 2020 will be all about the reflation trade and cyclical stocks rising. That means that the industrials, materials, energy, and financials stocks will take some of that bite away from the Semiconductor, Technology, and Biotechnology group’s which soared in 2019.
Industrial stocks (XLI) have already broken out, rising above a great level of technical resistance $80.75. The XLI ETF has been holding above support at $80.75 and is forming a bullish pattern known as a pennant. It means the sector is poised to rally in the weeks and months ahead, potentially by as much 15% to $93.25.
The material (XLB) ETF is very close to first breaking out and that could send the ETF back to alltime highs around $64.20. However, the gains could grow much large should the ETF rise above $64.20, potentially rising to as high as $67.50, an increase of 11%
Meanwhile, the Energy ETF (XLE) is nearing a significant breakout of its own after it rising above two downtrends, and is now heading to resistance at $63.40. It could result in the ETF rising to around $68.90, a jump of almost 11.5%.
Finally, rising yields and widening spreads will help to lift the bank stocks in 2020. The XLF ETF is at its highest level since 2008 and is on the verge of a massive break out should it rise above resistance at $31. It could result in the ETF rising to around $36.60, a gain of 17%.
It makes these four sectors the must-watch groups of 2020 and prediction 4 for 2020.
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.