As usual in the stock market, 2019 was another unpredictable year. In addition to the seemingly unending succession of new market highs, specific events also caught many market pundits by surprise.

Consider the IPO of Uber — one of the most anticipated market events of the year turned out to be a major disappointment for investors. On the other end of the spectrum, Beyond Meat priced its IPO at $25 in May, watched its stock price quickly soar above $230 and then watched it sink back down to around $75 toward the end of the year.

The one certainty in the stock market is that there will always be surprises. Here’s a look at some market predictions for 2020 — and tools you can use to prepare for them.

Prediction: The Market Will Be Up Again

The stock market roared ever higher in 2019, with the S&P 500 posting a gain of 29.2% through Dec. 26. If you believe in the law of averages, you might expect 2020 to be a down year — but that might be a mistake. History shows that when the market rises more than 20% in a single year, the following year is more likely to show positive returns than in other years.

Action: Stay the Course

If your portfolio has posted strong returns in 2019, then staying the course might lead to further gains in 2020. Although there will always be things to worry about when it comes to the stock market, this “wall of worry” can sometimes have a positive effect on Wall Street. For example, when everyone has already bought into the market, there’s not much cash left to fuel further gains. But when some investors sit on a pile of cash out of fear that a bull market can’t sustain itself, that money eventually has to go somewhere — especially when “fear of missing out” kicks in. Investors who avoided the stock market in 2019 might jump back into the market in 2020.

Prediction: The Year Will Be Much More Volatile

Despite a few ups and downs, the U.S. stock market in 2019 was much less volatile than in years past. That could change in 2020 because of a few potentially market-moving events on the horizon. Art Cashin of UBS, who has had his finger on the pulse of the stock market for more than 50 years, warns of three periods when volatility could strike in 2020: in January, when British Prime Minister Boris Johnson is expected to finally push Brexit through; in March, when Super Tuesday will bring a large chunk of the voting populace to the polls; and in July, when the Democratic Party might have a brokered convention.

Action: Stay the Course — But Put on Your Seat Belt

Investors have notoriously bad timing when it comes to stocks, often selling out right before big rallies or piling in just before big selloffs. As long as you believe the long-term trend of the market is up, then settle in and prepare to ride out the ups and downs that 2020 might have in store. You might even want to invest more money when the market softens — as long as you have the courage and conviction that the pullback is only temporary.

Prediction: Value Stocks Will Come Back

Stocks are broadly categorized into two types: growth and value. Growth stocks are the high flyers that grab the lion’s share of headlines, promise robust financial returns, and include high-profile names like Netflix, Uber and Facebook. Value stocks — which include most energy, utility and basic materials companies — are often dividend-paying, slow-growth firms with unspectacular share prices. Growth and value stocks typically run counter to one another on Wall Street, with the former performing better in up markets and the latter doing well in down markets.

In terms of stock returns, growth stocks have been walloping their value counterparts since 2007. Some analysts think this trend is due for a major reversal starting in 2020.

Action: Diversify Your Portfolio

It’s hard to sell stocks when they seem to go up every year. Market leaders like Facebook and Amazon have been helping drive this bull market for years, but how long can they continue to keep setting new highs? You don’t have to unload all of your high flyers, but if you believe the growth/value cycle might be shifting, you owe it to yourself to pick up a few “boring” value names. At the very least, you’re likely to make your portfolio less volatile.

Prediction: The Bear Will Finally Come Out of Its Cave

Market bears have spent the last couple of years predicting (incorrectly) that the bull run is due to end, but 2020 might finally be the year they’re proven right. Even though the current bull market has shown remarkable resilience in the face of a trade war, a yield curve inversion, recession fears and a presidential impeachment, it has to end sometime. Some pundits expect the market to turn bearish in 2020.

Action: Take Some Profits/Hedge Your Risk

An old adage in the stock market says that “you’ll never go broke taking profits.” If you’ve got big gains on the books, it might be time to cash those profits in. Booking large gains and preparing to reinvest during the next downturn might be a solid risk-avoidance strategy at this point in the game — particularly if you believe, as many market observers do, that the next major selloff is right around the corner in 2020.

Prediction: GE Will Recover

Poor old General Electric. Not only did the original member of the Dow Jones Industrial Average get unceremoniously dumped from that index in 2018, but the former blue chip stock also saw its shares plummet by about two-thirds since August 2018. From its all-time high of $60 in 2000, GE’s stock had fallen below $8 in late 2018 and barely traded above $11 as of December 2019. But some analysts believe a turnaround might be afoot for GE in 2020.

Action: Consider a Small Investment in GE

GE shares probably won’t be returning to their all-time high any time soon, but with a current price of about $11 per share, even a gain of $5 would translate into a nearly 50% gain. It’s a risky play, but investing in GE might prove profitable in 2020.

Prediction: Macy’s Will Recover

Venerable department-store chain Macy’s is in nearly the same boat as industrial conglomerate GE. After trading above $72 per share as recently as 2015, Macy’s has taken the elevator straight to the discount floor, trading below $20 per share for the last few months of 2019. While the iconic sponsor of the Macy’s Thanksgiving Day Parade definitely has its issues — not the least of which is competition from online retailers — some analysts think the stock is a bargain play that might be worth investing in.

Action: Consider a Small Investment in Macy’s

Macy’s is definitely a risky play. The company’s huge dividend has the potential to be cut, and sales trends have been weak for many years now. In fact, the stock was one of the worst performers on Wall Street in 2019. But if you believe, as some analysts do, that the dividend is covered by cash flow and the shares are undervalued, Macy’s could be a winner. If things don’t pan out for Macy’s, however, it could wind up in bankruptcy like so many of its retailing peers in recent years.

Prediction: Brexit Could Get Messy

What’s with all the recent news about Brexit? Didn’t that happen way back in 2016? Well, yes and no. Yes, the original Brexit vote passed (to much surprise) in 2016 by a 52% to 48% margin. However, after several delays, the official date of the UK’s exit from the European Union was pushed back until Jan. 31, 2020. Brexit could have a big (and messy) impact on the global economy and stock markets, but for now no one is exactly sure what will happen.

Action: Review Your Risk Tolerance and Asset Allocation

There’s not much you can do as an individual investor to stop Brexit. Nor can you predict with any certainty what effect it might have on your investments. In these cases, it’s usually best to stick with a diversified, risk-appropriate portfolio and just brace yourself for what could be a bumpy ride. Brexit might initially push markets down, but they might just as easily rise — which pretty much sounds like any other day in the stock market.

Prediction: The Recession Will Finally Hit

Recessions are an inevitable part of the business cycle, so it’s no surprise that some economists have spent the last couple of years warning that the bustling U.S. economy would finally hit the skids. So far, that hasn’t happened. In fact, the 2010s were the first decade in nearly 170 years in which there wasn’t a recorded recession, which is commonly defined as two straight quarters of contracting GDP. Even so, 38% of economists surveyed by the National Association for Business Economics in August said they expect a recession to begin in 2020. Another 34% said one will strike no later than the end of 2021.

Action: Review Your Asset Allocation

Since predicting economic cycles is an inexact science at best, it’s not usually prudent to adjust your portfolio on the expectations of a recession. But considering how long it’s been since the last recession — and the fact that you likely have sizable gains in your investment portfolio if you stayed in the market throughout the bull run — it might be a good time to review your current allocation to see if certain parts have gotten out of balance. For example, if your aim is to have 60% of your portfolio in stocks but found that they’ve grown to around 90%, it might be a good time to trim your position in stocks so they’re more in line with your original investment objectives and risk tolerance.

Prediction: Bitcoin Will Explode

Bitcoin has had a wild ride. It rose from near-obscurity at the beginning of the decade to a peak of nearly $20,000 per coin in late 2017, then dropped below $3,200 a year later before rebounding to its current levels of about $7,200. Because Bitcoin is a confusing investment that doesn’t trade on any publicly regulated exchange, many investors fear putting their money into it. However, some analysts predict Bitcoin’s price will soar well into the six figures within the next couple of years.

Action: Own Some Bitcoin

Before investing in Bitcoin, do your own research on how it works, what it’s used for and whether it matches your investment objectives and risk tolerance. Only then should you dabble in Bitcoin or any other cryptocurrencies. In the meantime, consider this: Even with all its volatility, Bitcoin’s price has risen more than 20-fold over the past five years. 

Prediction: Uber and Lyft Will Beat the Market

Uber and Lyft were two of the most highly anticipated IPOs of 2019. The ride sharing services epitomized “unicorn” stocks, those private companies with $1 billion valuations. For years, investors wondered when the companies would go public so they could buy in. But once the stocks finally listed in 2019, investor enthusiasm waned rapidly. Both stocks fell sharply soon after they went public and currently trade at considerable discounts to their IPO prices.

Action: Pick Up Some Shares of Uber and/or Lyft

Some analysts reckon Uber and Lyft have taken enough punishment already. While both companies still hemorrhage money, there’s a reason they carried $1 billion-plus valuations as private companies. As innovators that are transforming an entire industry, Uber and Lyft still have the backing of analysts who expect a big rebound in both stocks in 2020. Nibbling on the shares at their current prices could prove profitable if these analysts are on the mark.

Prediction: Historical Election-Year Trends Will Prove Accurate

According to the Stock Trader’s Almanac, election years in which an incumbent is up for re-election tend to be good ones for the stock market. Since 1949, the average Dow Jones return under such conditions is 10.1%. However, in years in which there is no incumbent running, the Dow typically goes down by about 1.6%. Much of this probably has to do with the fact that the market hates uncertainty, and when an incumbent is running, the market at least knows how one of the major candidates would govern.

Action: Stick With the Market

With President Donald Trump up for re-election, historical trends support a continued rise in the market. If Trump were to be removed from office or otherwise drop out of the race ahead of the election, the markets could face turmoil. But as things currently stand, historical market trends support another double-digit rise for the Dow. If your portfolio did well in 2019, then historically speaking, it’s likely in line for another good year in 2020.

Prediction: You’ll Make (at Least) One Mistake

This “prediction” is a bit tongue-in-cheek, but it’s also the one most likely to prove accurate. No investor can predict the future of the markets with certainty — and this includes financial professionals who’ve been trading stocks for decades. Making mistakes is simply part of the game when it comes to investing. If you can mentally prepare yourself for this truism, you stand a much better chance of doing well over the long haul.

Action: Stay the Course

The key to riding out your inevitable mistakes is to keep your portfolio in line with your investment objectives and risk tolerance at all times. Although you should anticipate making mistakes, trying to fix them by making more — like trying to time the market — is a recipe for disaster. Understand that you’re not going to bat 1.000. Just do all you can to ensure that your correct calls outnumber your wrong ones.

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