Stock market forecast December 2019
Latest update: 07-12-2019 21:11
Last month, the focus was on the first phase of the trade deal. Almost daily messages came. Then a deal was very close and then it only took place at the end of next year. Messages were not only contradictory.
They also alternated from a source with name mentioning and sources as initiates, close to the negotiations and knowledge of the negotiations. Games were played with investors. At the start of last month, investors were very positive and the hope of a deal always won.
Later in the month, investors were overwhelmed by all that contradictory reporting and the doubts increased. Therefore, less starting of the beginning of this month. Reason for me to wait a while before writing this monthly forecast.
In the past, economic figures received far too little attention. Stock markets moved very little. A bit strange because the companies listed on those stock exchanges are completely dependent on that economy for their profits. And the economy is not doing so well.
Many investors think that all this has to do with the trade war. That is not entirely true. After the previous crisis, many countries such as Japan, China, the US and especially all European countries have remained too dependent on central bank stimulation.
In particular, the extremely low interest rate stimulation gets worked out once. Because no matter how cheap it is to make debt. There comes a time when a consumer or business is so much in debt that a bank must say no to a request for a loan.
That no has increased significantly worldwide this year. Don't just think of credit to buy a house or car. Or a company that wants to borrow extra money. In the US in particular, they have also granted less credit for buying shares.
There is no credit crunch yet. But it is already a bit more difficult to get a loan worldwide. That slows down the economy.
In addition, there is the economic cycle of good and lean years. Books have been written about this. But the fact is that after better years there will always be some lesser years. The 7 years from the Bible still seem to be pretty good to date. However, we have already had about 8 good years behind us.
So even without a trade war things would have gone a little less this year. However, the trade war is causing a faster deterioration. Because cause and effect therefore seem more tangible. Daily reporting on the trade war means that economic sentiment is deteriorating faster.
The last few months there seems to be some economic improvement here and there. A number of figures are sometimes slightly better on a monthly basis. However, that says nothing. Seen over a longer period (several months or 2018 compared to 2019), the trend of economic figures continues to decline.
From an economic point of view, 2019 is just a much worse year than 2018. Industry has been struggling all this year. There is a shrinkage. A few months ago, the service sector also started noticing. In the services sector, in general, some growth but declining.
Finally, the consumer. Still low unemployment and relatively good consumer spending. Even here the first cracks. Consumer spending here (EU) and there (Asia) is already disappointing.
Germany, the country where industry first experienced shrinkage, has already had to deal with mass layoffs, particularly around the automotive industry. In the US, however, many more jobs were added last month. It was pretty much the only economic figure on which stock markets started to move.
We must take into account that corporate profits are coming under increasing pressure. At the current high stock markets, this gives above average high price / earnings ratios. Too high price / earnings ratios cannot be maintained in the longer term.
Then corporate profits must either rise or the stocks falls. Something to take into account at the end of this month. Because we will receive the company figures from mid-January. If there are profit warnings due to setbacks, they can come before Christmas given the holidays.
Now that we are in the last month of the year, it can already be seen that 2019 was a much less economic year than 2018.
Despite the occasional slightly better economic figure, the trend of economic growth continues to decline. As a result, it will be necessary for central banks to stimulate more and more in 2020.
The British elections
The British elections are on Thursday 12 December. Naturally important in the context of the Brexit. Stock markets can respond to the result. The British stock market and the British pound might move the most.
It will not, however, determine the direction for other European stock exchanges. Because exactly how the brexit will work will only become clear in the course of next year.
The FED meets on 10 and 11 December. The press conference on December 11. The FED will not lower interest rates, we already know. Given the good US job figures, I do not expect much news from the FED. More clarity around the repo market would be welcome. But I don't have high expectations.
That will be interesting. Christine Lagarde's first performance. She has already indicated that the ECB will become more involved with the climate. Quite a leap for a club that has the assignment to adjust inflation.
It does indicate that much is going to change within the ECB. I am very curious about what we will hear on December 12th.
The trade deal
We have been told all sorts of things recently. You can go in any direction with that. I think a few things are important. The American laws that deal with internal Chinese affairs. I think the Chinese cannot and will not accept that.
These laws make the chance of a trade deal very small. In addition, the deadline of December 15. If new import duties come into force on that date, there is a good chance that the Chinese will no longer want to negotiate further.
If the Americans give a delay, the Chinese are given the opportunity to stretch out time. That is a disadvantage for Trump. Because at the end of next year there will be presidential elections. Well before that time, Trump will wants to show off with a nice trade deal or put the Chinese away as scapegoats.
Because all kinds of negotiating and the associated uncertainties cannot be wanted by Trump during election time. Otherwise, other presidential candidates keep attacking him about it.
The American farmers are still a problem for Trump. He needs their votes. But then the Chinese have to buy more agricultural products in the US. Trump can, as before, give the farmers financial support as compensation. However, a deal with the Chinese is better.
The question is whether the Chinese want to buy so many agricultural products in the US and what they want in return. Probably abolish all import tariffs. But Trump can't do that.
Because then the other presidential candidates will blame him for starting a trade war and losing it. It is complex. In my view, no trade deal still stands the biggest chance.
Trump is therefore immediately covered should it go less economically. Because the Chinese get the blame for that. With a trade deal that scapegoat is not there and then Trump gets the blame should it go a little less economically.
The gold and silver price
I do not expect much from the central banks this month. Perhaps the gold and silver price on central bank statements are going to react somewhat. But I don't really expect direction. That will happen in 2020 with interest rate cuts and more money printing.
I still see the problem on the repo market as a big risk. If it escalates there, the gold and silver prices fly up. There is not yet a permanent solution for that repo problem.
Should the FED continue to increase the daily amounts, it will become head news once, because then something is going completely wrong.
The gold and silver prices will do little on the British elections. The trade war is of a completely different order. If things go wrong there, the gold and silver prices fly up.
With the gold mine and silver mine shares, I keep looking for promising laggards. In recent months I have looked at many mining companies. I already have some lists of contenders. When selecting, I pay particular attention to the following.
There must be a chance of a major positive change within a year. This could include starting a new mine, finding considerably more gold or silver, a takeover or a deal with a partner. Often you see that in the run-up to that big change extra costs are incurred.
Can be seen in disappointing third quarter figures. Due to the disappointing third quarter figures, the share started to fall. A slightly lower gold and silver price since last summer has pushed the share down even harder.
In the low share in combination with the chance of very positive developments in the not too long term, I see a great opportunity to buy.
I sold one of the 7 silver mine shares (Pan American Silver) in my portfolio at the beginning of December. The return on Pan American Silver in just under six months is 66%. Customers can read the reason for the sale under the description of the new share.
Another silver mine share was purchased as a substitute for Pan American Silver. The new silver mine share already rose by 31% in the first week in portfolio.
Combination of important announcements that the company will come up with in the next quarter. In the third quarter made a loss and the lower silver price so that the price hit a bottom. A bottom from where up to now and again, a strong rise always started.
The chances and tapping of that bottom was a reason for me to buy the silver mine share. Despite the 31% increase, the share is still well below the highest price this year.
In the first quarter of next year, the company expects to be able to announce a partner with whom they want to further develop a very promising large project. If you want to know in which gold mine shares I invest: click here. For silver mine shares: click here
The stock market forecast for this month
Much will depend on the course of the trade war. I don't expect another deal to come this month. If there is nevertheless a good deal, then stock markets can continue to rise until the end of the year.
If the negotiations are broken off, then that is bad news for the stock markets. How to stop the negotiations will then be important. Hostility, big words and threats and we get a correction.
Now both the Chinese and the Americans are not waiting for that. I therefore think there is a good chance that they will pull the plug very carefully. Then we have to deal with some profit-taking but no more than that. With daily updates I will keep you informed.
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The stock market forecast for the AEX
A nice trade deal and the AEX closes the year above 610. No deal and putting everything on the long track will make the AEX fall to 575. Still it has to be careful.
I haven't forgotten Christmas 2018 yet. Then it also seemed that we were going to close the year quietly. But suddenly we saw 472 on the screen.