Perfect Time to Profit from the US Stock Market
By Dale Gillham | Published 14 January 2020
Now really is the perfect time to profit from the US stock market as the S&P 500 has confirmed it is rising in a bullish trend with the market continuing to trade to new all-time highs over the past month. So let me give you my forecast for 2020 on the US stock market by looking at the history of the market.
In 2019 the S&P 500 rose a massive 28.88 percent while the Dow Jones Industrial Average rose slightly less achieving a return of 22.34 percent over the calendar year.
Looking at history, in the 69 years since 1950 the S&P 500 has achieved 20 percent plus growth in a calendar year 17 times. Therefore, we know with high probability that 25 percent of the time the S&P 500 will rise above 20 percent in a calendar year. That said, we don’t actually know which years it will rise so strongly.
In addition, on two occasions it achieved this spectacular growth of 20 percent plus in consecutive years, which include 1954 and 1955, and again in 1995 and 1996. These statistics indicate that while the market will rise over 20 percent roughly one in every four years, we cannot expect it to do so in consecutive years. Given 2019 achieved 20 percent plus growth, we know it is unlikely to expect this will happen in 2020.
Another interesting statistic is that since 1950 the S&P 500 has closed higher than it opened for the calendar year 73 percent of the time; therefore, the probability that we will experience another good year in the market is reasonably high.
For investors who prefer to buy and hold, the average annual growth of the S&P 500 over the last ten years to December 2019 was 8.95 percent; therefore, anyone who invested over the last decade should be reasonably happy.
The market rose strongly on the back of some of the biggest stocks in the market, and last year we saw some strong performance from many of the top stocks. But again, statistics tell us that the year’s best performers are unlikely to be the best performers in the following year; therefore, we can safely assume that the strong performers of 2019 will slow down this year.
One example is Apple, which rose nearly 90 percent during 2019, so it is highly unlikely to repeat this result as profit takers sell. Microsoft is another example, as it rose over 55 percent in 2019, therefore, my expectation is that its share price growth will also slow in 2020.
My recommendation for you to profit by finding the best stocks to buy in 2020 is to look for good companies that underperformed in the S&P 500 last year. You can do this by narrowing down the stocks in the DOW, such as 3m Co, IBM and Home Depot for possible opportunities to obtain good growth. I also recommend you purchase my latest award winning book Accelerate Your Wealth, as it will help you determine when and how to buy good stocks at the right time.
On another note, just before Christmas the house of representatives passed the revised North American free trade agreement. While the new deal is not vastly different from the 1994 agreement, it will support employment growth in US. The auto industry is a beneficiary with employment expected to rise over 7 percent with more car parts to be made in North America as the deal requires 75 percent of car parts to be made in the US, Mexico and Canada in order to remain tariff free.
Other benefits of the new agreement include stricter labor and environmental provisions, which I believe are long over due and are a very good sign. While I expect the trade deal to be beneficial for the stock market as a whole, I don’t believe it will have a big impact as the noise has already been factored in.
The same can be said for the increased tensions between the US and Iran in the recent conflict. Increased sanctions are to hit the metals and manufacturing sectors in Iran along with construction, textiles and mining. However, we need to remember that in 2018 President Trump imposed sanctions on oil and the financial shipping sectors again, which had a bigger impact on the stock market. Therefore, I believe with this conflict that there is really nothing to worry about as far as the stock market goes.
To wrap up, I believe the US stock market is well poised for further growth and good value can be found if you know what you are doing and look for it.
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