Opinion: Brace for a market correction in 2020

CWM Vice President Brian Lockett, CFP® shared his thoughts on the market outlook in 2020 and how small business owners can position themselves for success in Puget Sound Business Journal's 2020 Family Business issue.

Now that we’ve recovered from the flurry of holiday gift wrapping, cookie baking and visits from out-of-town guests, it’s time to refocus and look toward what lies ahead in 2020. The new year often serves as a period of reflection and resolution for many— not only in our personal lives, but also in business.

Family business owners, in particular, are likely in the process of reviewing last year’s outcomes and establishing new priorities. When planning for the upcoming year, it’s important to consider market data and trends to prepare for any changes that may affect your small business in 2020.

Market outlook

As the 2010s close out, it’s worth noting that this is the only decade on record going back to the 1850s that did not experience even a single short-term economic recession. In other words, we are in the longest bull market in U.S. history.

That said, even though unemployment is at its lowest since the 1950s, with the stock market at an all-time high, historic trends suggest that the U.S. economy and stock market are long overdue for a substantial correction.

For example, corporate profit levels are barely above those set back in 2014, while the S&P 500 value is nearly 50 percent higher. The last time a significant gap between valuation and profit existed (2000 and arguably 2007 as well), recession and market calamity soon followed.

In fact, valuations are at an all-time high — even higher than the extreme valuations seen prior to the dot-com crash of the 2000s, which wiped away almost half of the S&P 500’s value within the subsequent two years.

Read Brian's complete article in the Puget Sound Business Journal

If you have questions or would like to schedule a consultation with one of CWM’s financial advisors, please contact us here.

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