High returns or recession: What does 2020 have in store for your money?

It's that time of year when investment analysts break out their crystal balls and issue predictions for what the upcoming year will bring for financial markets.

This year I've decided to throw my hat in the ring by answering the top financial questions about 2020 from my clients and CBC listeners.

Will there be a global recession in 2020?

I don't think we will see a recession as long as the central banks around the world keep interest rates low and continue expanding their balance sheets. They are kicking the can down the road by printing more money and throwing it at the economy — conditions that are positive for stocks and stave off recessions. 

Forecast: No recession in 2020.

How will the stock markets fare in 2020?

Stock market investors were treated very well in 2019 with both North American and international markets experiencing double digit gains. U.S. stocks were up by almost 30 per cent while Canadian, Chinese and European stock indices returned approximately 20 per cent.  

Forecast: Stock markets will be higher than they are today, but returns will be less then they were in 2019. Mid to high single digit returns for the North American markets.

How will the U.S. election affect the stock markets?

During a U.S. election year, markets typically trend higher and finish the year with high single digit gains. They also tend to be quite volatile so I'm expecting a couple of inter-year market corrections of at least 10 per cent. These corrections often occur when the political mud-slinging intensifies during the summer months leading up to the election. However, once a winner is declared — markets typically stabilize before finishing the year strong. 

Forecast: Increased market volatility with several inter-year corrections, which I would treat as buying opportunities.

How will the U.S./Iran conflict affect our economy and stock markets?

Entering 2020, investors were feeling comfortable but that all changed when a U.S. drone killed a senior Iranian military figure and Iran vowed to retaliate. Following the attack, oil prices, the Canadian dollar and gold rose while stocks sold off. Since the attack, markets have recovered most of their losses and some (i.e. the Toronto Stock Exchange) are at new all-time highs.

Forecast: While the Middle East conflict is upsetting and worth monitoring, I believe that other international factors such as U.S.-China trade negotiations, Brexit and the U.S. and China's central banks' willingness to stimulate their economies will have more of an impact on global stock markets and economies.

Should I be making changes to my investment portfolio?

Since 2019 was a great year for global stock markets, now is a good time to trim some profits and re-allocate them to investments that are more defensive. As 2020 is expected to be quite volatile, speak to your advisor about your portfolio's downside protection strategy as well as how it is positioned to benefit from an increase in market gyrations. 

Consider tweaking the geographic asset allocation of your portfolio. Do not be afraid to add to U.S. and international positions.

Forecast: Canada will under-perform compared to the U.S. and international stock markets.

Overall, I'm expecting slow growth to continue for most of the world economies and I believe that stocks will outperform bonds.

This column is part of CBC's Opinion section. For more information about this section, please read our FAQ.