U.S. economy grew in 2019. Moreover, the economy is growing for more than ten years. Stocks benefited from the situation. However, several risk factors may affect the stock markets in 2020.
One of the biggest issues which may have a dramatic impact on the stocks is the trade war between the U.S. and China. The countries reached an agreement about phase one trade deal in 2019. However, the leaders of the U.S. and China have to sign this agreement.
Moreover, the partial trade deal won’t solve all problems as sides have to negotiate a full-blown agreement. It will take time to come to a deal as negotiators have to discuss many sensitive topics. Meanwhile, renewed tariff threats and accusations may appear at any time during the trade talks.
As a reminder, Trump administration also initiated trade disputes with other countries. Last month, Trump renewed the threat of steel and aluminum tariffs on Brazil and Argentina. Furthermore, the question of auto tariffs on Germany remains open as well as tariffs on other European goods.
Economy and the presidential election
The list of challenges is quite long, and some of them may escalate in 2020. Stocks are under threat as U.S. economic expansion may come to an end at some point.
Economic growth is expected to slow down in 2020. Moreover, global manufacturing may also decline this year, which is a severe challenge to the stocks.
Nevertheless, a reduction in political uncertainty, as well as positive trends connected with global trade, will boost the market.
Another risk is the upcoming presidential election. The current U.S. President is running for reelection. It is too early to say who will become the candidate from the Democratic Party. According to analysts, a more moderate Democrat could reduce political uncertainty.
The stock market is sensitive when it comes to politics. Candidates and the incumbent president should be careful when making statements about the economy and the stock market.