Biggest Risks the Stock Market Faces in 2020

(Photo : Reuters)

The high hopes of accomplishing the first phase of a trade agreement between the United States of America and the country of China has significantly affected the stock market before the close of the year.

According to Wall Street, the trade will include high risks to the stock market in 2020.

Despite the nearing of a preliminary agreement between the two countries, the majority of the investors in stock markets are still skeptic because of the rewards and punishment technique used to acquire desired behavior in the current year's trade performance.

According to the banks of Wall Street, the trade war includes two risk factors.

Currently, the two countries had only agreed on fixing a first phase agreement. Upon the signing of the agreement between the two countries, the next problem is the negotiation process of deals. The longer the conversations lasts the longer the time that the risk of getting multiple negative news and threats to the renewed tariff occur.

According to the economist named Morgan Stanley, the worsening of the trade war will eventually harm the economy of the United States of America. The trade war also can negatively affect employment and businesses' spending.

The country's trade war with China is one of the challenges that limit global growth. The country had also released announcements of imposing import tariffs on some of its European trade partners. 

The auto tariffs to be imposed for German business partners will be talked about next year. 

The current president of the country, Donald Trump had also announced its plans on imposing import tariffs on steel and aluminum from Argentina and Brazil beginning December.

Also, the development of trade may result in developments in the current stock market in 2020. This may result in an increased risk to investors because of the expectations of slower progress in the talks for reaching an agreement.

According to an analyst from the Bank of America, a significantly bigger trade agreement may create its projections for 2020 as conservative.

The risk of economic recession in the country had decreased in the last half of the year. In the first quarter of the year, the recorded annual GDP growth ratio was 3.1 percent. The growth rate had fallen to two percent and 2.1 percent in the second and third quarters, respectively. It is expected that the economy's growth will be slowing down in the following year.

The global manufacturing sector of the country and the world had been one of the main sufferers of the trade war. The trade war had negatively affected the demand prices and material prices in the industry. However, according to records, the situation had improved and this may help the stock market in 2020 to perform better.

The presidential election in the United States of America in 2020 is also being considered by many investors in making decisions. 

An ideal candidate will be able to represent risk factors for each industry and also provide a fiscal balance in the United States.