Most families have annual traditions as each year comes to a close. They travel miles and hours to spend time together. They wear matching pajamas and pose in front of Christmas trees. They cook massive turkeys, light candles, and drink far too much eggnog.
But in the investing world, the traditions are a bit simpler.
I’m talking about predictions… looking ahead at what will happen in the economy and stock market over the next 12 months.
I often poke fun at people who participate in the annual crapshoot of wild guesses. That being said, I usually still end up throwing my own best guesses into the ring.
Actually, I hesitate to even refer to them as “best guesses.” Yes, part of making predictions is about having some fun. But if you know me at all, you know how much I value research, so they’re also based on facts, trends, and firsthand observations. They all point me to what I truly believe will come to fruition.
To give you an idea of what my predictions are all about – and also to keep myself accountable – let me first provide a quick review of the 10 predictions I laid out for 2019 before sharing what I expect for 2020.
Grading My 2019 Predictions
On December 26, 2018, I shared my top 10 predictions for 2019.
Of those 10, six were 100% correct:
1. The S&P 500 will climb a minimum of 25%. Not to toot my own horn, but this is the prediction I’m most proud of. The index hit an all-time high of 3,247.93 on Friday, December 27, putting it up an incredible 29.6% year-to-date.
What made this prediction even more impressive was the fact that in December 2018, the market was on the cusp of a recession. To say that my view was in the minority is an understatement. I’ve told you before about my appearance on CNN and how Richard Quest almost couldn’t see how I could even think that.
2. Uber Technologies and Lyft will go public… and end up disappointing. Both ride-sharing companies did go public. And right on cue, they both disappointed. Each stock has lost at least one-third of its value from its post-IPO high.
3. Fake will be good news. I believed that the increasing popularity of “fake meat” was going to going to boost Beyond Meat’s scheduled IPO. Well, the stock has rallied more than 400% since going public in May.
4. Cryptocurrencies will bounce back. Even with a fourth-quarter pullback, bitcoin is up almost 100% in 2019. Some of the smaller altcoins are up much more.
5. Microsoft will join the $1 trillion club. In December 2018, Microsoft was worth about $800 million, so it would have taken a lot for it to accomplish another 25% move higher. Microsoft and its peers struggled throughout much of the year… but the stock joined the trillion-dollar club in mid-2019.
6. Oat milk will become the new almond milk. This started out as a silly, fun prediction, but it came true! Oat milk is now available at most coffee shops and in the milk aisle at your local grocery store. Now I need to figure out what kind of milk will be hot in 2020…
Not There Yet
A few of my predictions didn’t come to fruition in 2019, but that doesn’t mean they’ll never happen in the future – I was just a bit early! I stand by each of the four remaining 2019 predictions heading in 2020.
1. Teladoc will be purchased by Amazon. The world leader in telehealth had a nice year, gaining about 67%. As telehealth continues its way toward the mainstream, I expect some big offers will come in for the company. Amazon is already making waves in the healthcare space, and I see the future acquisition as a smart move.
2. Amazon will buy a big box retailer. The company purchased Whole Foods Market a couple years ago, and I still believe another big name will be picked up by the grocer.
3. Apple will finally spend its cash. Apple didn’t make the “big” purchase I predicted, but it did make a handful of smaller acquisitions that included autonomous vehicle company Drive.ai for an undisclosed amount. It also paid $1 billion for Intel’s smartphone modem business.
4. A large country will be hit with a major cyberattack. While this isn’t something I’m rooting for, I believe the odds of it happening are only increasing. And we did see a few noteworthy cyberattacks this year. Facebook and First American Financial saw 500 million and 900 million accounts affected, respectively. The city of Baltimore and other major metropolises around the world also got hit. So I guess we could consider this prediction partially correct in 2019, but I won’t be greedy…
My 2020 Predictions
Keeping those four remaining predictions in mind, let’s now look ahead to the coming year. I expect it to be a big one with a lot of major changes in the next 12 months.
One of the biggest and most widely followed presidential predictions will occur in November…
The Summer Olympics in Tokyo will highlight new technologies…
I could go on and on… and on.
So without further ado, here are my 10 Fearless Predictions for 2020.
Prediction #1: President Donald Trump will get re-elected. Most polls currently show President Trump ahead in the general election. More importantly, the global betting parlors give him a 70% chance of getting re-elected. (Keep in mind that this is not a political suggestion in one way or the other. It’s just me sharing my thoughts on who I believe will win.)
History shows that a sitting president almost always wins re-election if the economy is strong. Well, wages are increasing, unemployment is near historic lows, interest rates are also near historic lows, inflation is under control, corporate profits are rising, and the housing market is strong. And the stock market is at all-time highs. I’d say the economy is looking pretty strong.
Prediction #2: The S&P 500 will be up at least 20%. Remember how unpopular my 2019 prediction of a 25% increase in the S&P 500 was just 12 months ago? I suspect this prediction to receive similar jeers – but bring it on.
I expect many, many stocks – especially small caps – will climb even more in the coming year. But my prediction is that at some point during 2020, the S&P 500 will be up 20% or more.
Prediction #3: There will be at least one correction in the stock market. I look for 2020 to be a year filled with ups and down – just like every year. While I do expect a 20%+ rally at some point, I also believe we are due for a pullback of between 10% and 20%. Historically speaking, a correction occurs about once every 13 months. And the last time the stock market suffered a correction was in December 2018.
I am very bullish heading into 2020, but given the election uncertainties, I think stocks are ripe for a quick pullback. That’s perfectly okay, though. Remember, corrections are healthy and even necessary. Just after the last correction, I launched my 10X Venture Portfolio in Early Stage Investor, and in less than one year several of those stocks have already doubled. Similarly, any correction in 2020 will be met with amazing buying opportunities.
Prediction #4: Small-cap stocks will CRUSH large-cap stocks. Over the last three years, the S&P 500 has more than doubled the S&P 600 Small Cap Index. But that outperformance is about to change – and in a big way. Looking back to January 1994, the charts show that small caps beat the large caps by nearly 340%. Over the long term, small-cap stocks offer the biggest upside. And after a few years of lagging the large caps, it is time for the little guys to climb back on top. Smart investors will want exposure to the best positioned small-cap stocks.
Prediction #5: Warren Buffett will cement his legacy. Legendary investor Warren Buffett is 89 years old, and his right-hand man, Charlie Munger, will turn 96 on New Year’s Day. So, next year I believe Buffett will make his biggest acquisition in the history of Berkshire Hathaway. With about $128 billion in cash – a very large amount, even for this company – a deal must be done.
Even more reason for a big move is the fact that the stock has underperformed recently. In the last year, Berkshire Hathaway is up 10% while the S&P 500 has climbed nearly 30%. It’s still lagging when you look out over the last three years. It is time for Buffett and Munger to make one last big splash.
The big purchase will likely be tech-related as Buffett finally admits that he missed out on the biggest rally ever in technology stocks. Technology enables the future. If he wants his legacy to live on, he has to join the 21st century. If Buffett chooses to remain stubborn, he will likely look to buy a large retailer for a steal. Either way, a deal is almost guaranteed.
Prediction #6: The 2020 IPO market will be both a boom and a bust. The next 12 months will see a robust IPO market as a number of “unicorns” – privately held companies valued at more than $1 billion – finally take the leap into the public trading arena.
The biggest name on the calendar is Airbnb – but I expect it will also be the biggest bust. The company has continually tried to fight off lawsuits as early investors push for an IPO so they can cash out. Even though Airbnb has been expanding outside of pure home rentals, its valuation will be so high that the average investor will likely run into another Uber situation. (The stock is down 28% from the closing price on its first day of trading.)
One of the IPOs I am looking forward to in 2020 isn’t quite as exciting as Airbnb or any of the other 100+ tech-related companies poised to go public. It’s Casper, the maker of next-generation mattresses.
If you’ve shopped for a mattress at any point in the last decade, you know it’s as brutal as looking for a used car. Casper is valued at just over $1 billion and is taking the mattress world by storm. With celebrity endorsements from the likes of Kylie Jenner and Leonardo DiCaprio, the company is projected to earn close to $400 million in 2019. I have purchased a Casper mattress myself and it’s fantastic. Plus, it’s less expensive than a traditional mattress and I didn’t have to deal with the awful mattress buying experience. A win-win-win!
Prediction #7: The next generation of smartphones will be foldable. The iPhone was launched 11 years ago, and since then the way we communicate has changed dramatically. We’ve seen continued innovation over the last 11 years, but nothing has been a total “game changer” since the iPhone. I believe that will change in 2020 with the mass introduction of foldable and flexible phones – ones that can transform from a tablet to a smartphone and even to a watch.
Prediction #8: Artificial and virtual reality will become, well, a reality. Both artificial and virtual reality have been available for years, but in 2020 we will start to see just how important these technologies are to the future of society. Everything from entertainment to education to healthcare to the future of manufacturing will be affected.
Imagine shopping in Italy for a new leather bag without physically leaving your couch. Or siting courtside at the NBA finals… or playing a video game that is as real as life itself… or learning Mandarin from a classroom in China. The possibilities are endless. Every aspect of the way we live and work will change forever.
Prediction #9: Tourists in space. The International Space Station will open its doors to space tourists in 2020. Virgin Galactic is planning to send anyone with enough money up into orbit next year. It will take time before space tourism is accessible for all, but 2020 will be known as the year it really began.
Prediction #10: The fax machine will disappear – finally. The good old fax machine peaked in 1997 when 3.6 million were sold, but the now-outdated communication device is on the verge of extinction.
It was a game changer in its time, but innovation marches on. Email, social media, messengers, and e-docs have eliminated the need for faxes. I suspect many of you haven’t used a fax machine in years – younger readers may never have. But trust me, there are still too many out there who do. Try dealing with the government… apparently they got a deal on fax machines and refuse to throw them out! I believe 2020 will (finally) be the year we see the last fax.
Bonus Prediction #11: Cryptocurrencies will be best performing asset class – again! Bitcoin and its smaller peers, often referred to as altcoins, were the best performing major asset class in 2019. Even though the sector closed well off its yearly highs, the gain of about 100% well outpaced any stock index. I believe the trend will continue in 2020, led by an event called “the halvening” that is set to take place in May. (More on that in upcoming MoneyWire articles.) The two previous times the halvening occurred, cryptocurrencies soared higher by many multiples. So… get ready for another big rally in the coming year.
Bring on the ‘20s
And there you have it – my 10 Fearless Predictions for 2020… plus a bonus prediction! Just like in 2019, not all will come to fruition in the next 12 months. But many will, and the rest will likely happen…, just a little bit further down the road.
If you can’t tell by now, I am incredibly excited about the coming year and the opportunities it will bring for investors. I look forward to helping you take advantage of what I believe will be a hugely prosperous year ahead.
Enjoy the final hours of 2019, and I will talk to you again in 2020.
Until next time,
Editor, Cannabis Cash Weekly