We partner with Cumberland Private Wealth for their expertise on the markets. Working together, CDSPI and Cumberland take a comprehensive approach to wealth management for dentists. In this article, Peter Jackson, Chief Investment Officer at Cumberland Private Wealth, and Craig Millar, Chief Investment Officer at Cumberland Investment Counsel, provide an overview of the markets in 2019 and share their outlook for 2020.
Peter Jackson notes that after a volatile fourth quarter in 2018, the North American markets rebounded well in 2019. The S&P 500 was up 31.5% (USD) and TSX was up 22.9% (CAD), much of it due to earnings growth catch-up from 2018.
Some investors worry that if there is a good year in the financial markets, the following year is bound to take a dip, but historical data shows a different story. Since 1950, the S&P 500 has had a total annual return above 30% (USD) on 13 occasions. On 11 of those 13 occasions, the U.S market went up again the following year, with an average return of 15%.
The industry consensus for earnings growth in 2020 and 2021 is approximately 10% in the US and 7% to 8% in Canada respectively, with stock prices mirroring those expectations.
In terms of current valuations, Mr. Jackson suggests that although North American markets are trading above historical averages, they are still below levels where investors should be concerned, especially with many positive indicators signaling growth.
Mr. Millar is equally enthusiastic about international markets. Despite two bouts of volatility in May and August of 2019, it was a very good year for global and international investors with many equity markets growing in excess of 20%. Growth stocks in technology and communications services led the way, and financial services also did very well. Geographically, there were healthy gains in developed countries such as France, Switzerland, Denmark, Germany, as well as strong results in many other parts of the world.
Economists are predicting 2.5 % global GDP growth for 2020, and are anticipating a greater than 10% global earnings per share increase with similar results anticipated in 2021.
It must be acknowledged that there are some risk factors that are difficult to predict, many of them political. You can’t really forecast the affect of trade wars, Brexit, the coming U.S. election and middle-east unrest, but from what is known—earnings growth, GDP growth and attractive valuations—analysts are comfortable with a positive international outlook for 2020.
What about a recession?
The past decade gave us the longest and strongest performing bull market in history, which has some investors worried about a potential recession. But many signals indicate this is unlikely in the foreseeable future.
There was mild concern about a brief yield curve inversion in the fall, which often precedes a recession, but it was considered to be an outlier, and unlikely to have immediate consequences. Several other factors, such as a stable interest rate environment, improving trade relations, low U.S. inflation, and strong jobs and housing numbers, all point to a healthy outlook for 2020.
The best way to take advantage of all market conditions is with good financial advice.
The investment decisions you make now can have an impact for years to come. That’s why it’s important to rely on experts. Contact CDSPI Advisory Services* to find out more about current markets and the opportunities they provide.
*Investment advisory services are provided by licensed advisors at CDSPI Advisory Services Inc. Restrictions may apply to advisory services in certain jurisdictions.
Information in this article is for informational purposes only and is not intended to provide financial, legal, accounting or tax advice. Reasonable efforts have been made to ensure that the information contained herein is accurate, complete and up to date, however, the information is subject to change without notice. Past performance is not necessarily indicative of future results.