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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 Number 8: US 10-Year Treasury Rate Will Surge to 2.3%
With global growth returning and the US economy surging to a 3% growth rate in 2020, interest rates in the US will begin to rise. It will result in the long-end of the yield curve increasing, sending the 10-Year rate to 2.3%, up from its current rate of 1.83% on December 14.
Inverted in 2019
The yield curve was inverted for much of 2019 as investors feared a US recession. However, that recession never came. But the slowdown was enough to get the Fed to move from a tightening stance to neutral, to cutting. As a result, the Fed lowered rates three times between July and October. It forced the short-end of the curve lower and helped to re-steepen the yield curve.
Yields Rise in 2020
Now with growth returning in 2020, rates on the long end will rise further. The chart shows that the 10-year is currently below a level of resistance at 1.95% The trend for the 10-year rate is higher at this point, forming a technical pattern known as a rising triangle. It will result in the 10-year breaking out and climbing to its next level of resistance at 2.15%. However, it will not stop climbing there. Instead, it will retrace 50% of the decline that started in late 2018, rising to resistance at 2.31%.
Additionally, the RSI has formed a bullish divergence. The pattern formed when the RSI fell to 18.5 in late May, creating a series of higher-lows, while yield continued to plunge. The bullish divergence suggests that momentum has shifted to favor yields rising over the longer-term.
Yield Curve Normalizes
Rising long-term rates will normalize the yield curve and widen spreads between short and long-dated maturities.
Making 10-year rates rising to 2.3%, prediction number 8 for 2020.
-Mike
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.
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