Twenty Predictions for 2020

Our predictions for 2019 weren’t perfect, but we did get some things right. The Federal Reserve pumped its brakes on hiking interest rates and financial assets across the spectrum outperformed, though oat milk never made it to our refrigerator. This fits with what we learned from our predictions for 2018, 2017, and 2016 – we should stick to our day job and focus on what we know best.

Acknowledging that we can’t forecast everything serves us well in managing assets, and we recommend that investors hedge when they have less than a 50% change of being correct and invest where they have a clear, repeatable edge. For considerations outside of the investment process, our predictions for 2020 are listed below. We wish you great health, happiness, and luck in what could be another unpredictable year.

  1. The US economy will avoid a recession, but below-trend growth will persist.
    Despite a yield curve inversion amidst rising geopolitical tensions, the economy remains on solid ground with healthy employment and low borrowing costs. These conditions will help support growth sufficiently to avoid the recession many pundits had called for in 2020.
  2. Financial markets will push upwards with higher levels of volatility.
    Groundhog Day will come early this year with familiar headlines from Brexit to trade negotiations with China. These resurfacing risks will combine with less predictable events to drive late cycle volatility, but persistent money flows will ultimately push markets higher.
  3. Deepfakes will proliferate yet prove ineffective at influencing people.
    Social media platforms are well aware of the potential issues posed by deepfakes – fabricated videos using artificial neural networks – and have built extensive systems to detect and combat them. While plenty of attempts at misleading people will be made using this technology, they will be less effective than traditional methods of deception already present across social media.
  4. Interest rates will remain in a holding pattern caught between upside and downside risks.
    We were correct that the Fed would pump the brakes on its hiking cycle last year, and in 2020 a waiting game will ensue. Competing forces of strong employment and subdued inflation amidst modest levels of growth will delay action until conditions change in a meaningful way.
  5. Many more countries will meddle in the upcoming US election.
    The floodgates for interference were opened in 2016 and this troubling trend is set to continue. Future meddling will extend well beyond the usual suspects, as many long-standing relationships are now in flux with much at stake on the international stage.
  6. The V2C business model will fall apart.
    The record amount of venture capital available for startups in recent years had an indirect beneficiary: the consumer. With an abundance of cash, many venture-funded startups have supplemented the costs of their services in a perilous stretch to gain users. After the recent high-profile restructurings of companies like WeWork, the unsustainable model of customer growth over solvency will face scrutiny, and more businesses will join a corporate graveyard of thousands that were unable to turn the corner to profitability.
  7. More brands will follow Nike and pull their products off Amazon.
    Customer data is gold in the digital age, and Amazon controlling it won't work for major brands in the future. This dynamic, combined with the rise of counterfeit goods in online marketplaces, will reposition established firms like Nike to go directly to their consumers.
  8. Activist investors will become increasingly active.
    With limited avenues left to generate excess returns in stocks, activists will make the case for management changes at companies that have lagged through the most recent cycle. Count Jack Dorsey of Twitter, which continues to underperform its peers, among the executives who have been put on notice.
  9. The 49ers will win their first Super Bowl since 1995.
    The Baltimore Ravens are the odds-on Super Bowl favorite with Lamar Jackson’s extraordinary skillset on display each week, but the 49ers have a fierce defense and an overlooked weapon on the sideline. When it comes to San Francisco’s offensive playcalling, Kyle Shanahan is playing chess while others play checkers, and this may be the x-factor they need to go the distance.
  10. Biosensing technology will enter the mainstream.
    Fitness trackers opened the door for wearables which now extend well beyond counting steps to monitoring vitals and measuring sleep quality. Using predictive data like temperature to alert users about oncoming viruses is the natural next step for this technology to help people live healthier lives.
  11. New Caledonia will become the world's newest country.
    After rejecting independence in 2018, the spectacular island chain in the South Pacific has a referendum scheduled for September 6, 2020. This time will be different, and people will follow the trend of deglobalization by choosing to break colonial ties with France.
  12. The race to the bottom in ETF fees will reverse.
    A decade of downward pressure on fees charged by exchange-traded funds has been hugely beneficial for investors, but there does come a point where you get what you pay for. Smarter strategies that actively solve issues in portfolios will justify their costs and gain market share from bare-bones financial products.
  13. For the first time in the Academy Awards’ storied history, a foreign film will win Best Picture.
    Parasite is already the first Korean film to win the Palme d’Or at the Cannes Film Festival, which it did by unanimous vote. The complex drama is now positioned for the Academy with widespread critical acclaim and themes that are particularly relevant today.
  14. Growth of the podcasting industry will rescue journalism.
    Layoffs have been endemic in print journalism for years as the industry undergoes structural change. Through this transition, podcasts by reporters covering the topics they write about have become among the most downloaded on major platforms. In an industry expected to top $1 billion in advertising revenue by 2021, podcasting will propel journalism to a prosperous future beyond obstinate paywalls.
  15. Japan will top its best Olympic medal count.
    After outperforming expectations while hosting the Rugby World Cup in 2019, Japan will again rise to the occasion on its home turf in 2020.
  16. Factor investing will replace old-school fixed income approaches.
    We've written about this extensively already, but the time is now for systematic fixed income. Regulatory changes and the electronification of bond markets are producing a deluge of data where systematic analysis holds a meaningful edge. A changing of the guard is already underway in fixed income, and this will accelerate as factor-based approaches showcase their advantage.
  17. Regional flight traffic will decrease.
    After activist Greta Thunberg famously sailed across the Atlantic for the UN Climate Action Summit, many people have grown more aware of their environmental impact when traveling. With flight-shaming already popping up on social media, alternatives to air travel will be sought more frequently.
  18. Robo-Advisors will shift toward pulling people out of debt.
    Investing people's assets is only one side of the financial equation, and for millennials debt has become a pressing issue. Financial firms will address this with new, technology-driven products to help people get out from under growing levels of personal debt.
  19. More car companies will invest in rapid charging stations.
    Tesla took an early lead in charging infrastructure with stations strategically located across the US. This first mover advantage will be challenged by Volkswagen’s launch of Electrify America as part of the company’s emissions scandal settlement. With over one million electric vehicles on the road already, more companies will pursue this opportunity.
  20. We will eat more vegetables, even if they go into hiding.
    The health benefits of plant-based diets are well-established, and startup companies like Peekaboo Ice Cream will increasingly sneak these into the foods we enjoy most. Taking cover under the guise of chocolate, vegetables will enter our diets in new and innovative ways.