Why This U.S. Bull Market Will Remain ‘Alive and Kicking’ - Barron's

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Evoking the adage that bull markets don’t die of old age, analysts at Piper Jaffray have pegged their 2020 price target for the S&P 500 at 3600.

If Piper is right, that means 13% upside from where the index traded on Monday. So far in 2019, the S&P 500 has gained 27%.

“As we look ahead to 2020, we are optimistic and see several catalysts that we believe will keep this bull market alive and kicking,” Piper analysts wrote.

Piper is significantly bullish than some other prognosticators. Lisa Shalett, chief investment officer at Morgan Stanley wealth management, said 3250 is her bull-case scenario for where the S&P 500 will end 2020.

Chief among the positive investment themes Piper lays out are trade, the Federal Reserve and the election.

To be sure, trade policy is still a risk. But trade-induced volatility will probably be temporary and represent a buying opportunity, the analysts said. Further, improving U.S. economic data should relieve investors and thus reduce some of the volatility around trade-triggered price action.

On the Fed front, monetary policy should continue to support U.S. equities next year given broad expectations that the Fed is on hold. Fed Chairman Jerome Powell has signaled that the bar is pretty high for a hike, and any slight uptick in inflation wouldn’t be enough to trigger one. If there’s any move at all next year, most investors and analysts think it would be another cut.

What’s going to take center stage next year is the presidential election, Piper said. Historically, election years haven’t been disruptive to annual equity returns, the analysts note, adding that since 1900, the Dow Jones Industrial Average has posted average returns of 7.7% during election years and finished positive 70% of the time. That’s versus non-election year returns of 7.3% with a 63% positivity rate.

With a Republican incumbent president, the index has generated average returns of 10.3% during election years and finished positive 75% of the time, Piper said, with energy and financials typically leading and technology often lagging. Year-to-date, the S&P 500’s energy sector is up 7%, lagging a 30% gain in financials and a 46% increase in technology.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

2019-12-17 10:00:00Z
https://www.barrons.com/articles/why-this-u-s-bull-market-will-remain-alive-and-kicking-51576576800