For financial markets, 2019 was a fantastic year, as we experienced robust returns across most asset classes. A 60/40 balanced portfolio posted a 20% return for the first time since the late 1990s. The year’s stellar gains for global stocks were driven entirely by valuation expansion, as S&P 500 companies grew earnings by just 1%, while international developed market and emerging market equities saw declines of 3% and 8%, respectively. The key driver of multiple expansion was the sharp pivot from tightening to easing on the part of the US Federal Reserve, the European Central Bank and other global central banks during the year.
2019 will be a tough act to follow, but we expect risky assets to grind higher in 2020, as an improvement in global growth drives a recovery in corporate earnings growth. For US equities, we foresee total returns in the range of 6% to 10% on corporate earnings growth of between 3% and 7%. We see the potential for both higher returns and more robust earnings growth in overseas markets.