- Dow Jones Industrial Average (DJIA) futures are slightly higher Tuesday morning.
- Fears of a stock market crash next year are spooking investors.
- Strong consumer confidence reading could be a catalyst today.
Dow Jones Industrial Average (DJIA) futures are slightly in the green early Tuesday morning as the stock market looks shaky once again after yesterday’s carnage. The Dow Jones was decimated Monday as fears about a possible market correction in 2020 set in.
Joe Davis, head of investment strategy at Vanguard, has already warned that there is a 50 percent chance of a market crash in 2020. Again, Wells Fargo’s securities head Chris Harvey believes that the stock market could correct between 5 percent and 10 percent in the early part of 2020.
— Negative Delta (@NegativeDeltas) December 24, 2019
The stock market has soared impressively over the past year thanks to the Federal Reserve’s favorable policies and the potential solution to the U.S.-China trade war. Bullish news seems accounted for and the Dow Jones is looking for a fresh catalyst. The problem is that no such catalyst appears to be on the horizon.
Dow futures on shaky ground on the last day of the year
Dow Jones Industrial Average futures are up 34 points, or 0.12 percent, as at 5.47 am ET. This is in stark contrast to last week when the Dow was in a great mood thanks to the impending signing of the U.S.-China trade deal and some other positive economic data.
Futures on the S&P 500 are up 0.12 percent, while Nasdaq Composite futures are up 0.10 percent. Though all the future indices point toward a strong opening for the stock market today, it doesn’t necessarily mean that the Dow Jones will end the last day of the year in the green.
Lack of fresh catalysts could be the stock market’s undoing
The Fed played a key role in keeping the Dow Jones and the broader stock market in bull-mode this year. Interest rate cuts kept investors in high spirits as the market believed investors will start spending more money thanks to low borrowing costs.
Federal Reserve projections show no interest-rate changes next year but the annual rotation among voters could still influence policy as incoming members include an outspoken dove while two hawks depart https://t.co/PGQ6M7Ft7y
— Bloomberg Markets (@markets) December 30, 2019
What will 2020 bring us? Having lowered the interest rate in July, September, and October 2019, the Fed has indicated that the chances of a cut in 2020 are remote.
Meanwhile, the market’s attention will shift toward the actual execution of the trade deal that the U.S. and China are expected to sign. The deal hasn’t been signed yet and the attention is on phase 2 of the trade war between the two countries. If deeper issues related to intellectual property theft and the ban on Huawei are not addressed in 2020, the trade war could erupt once again.
But there’s a chance that the Dow and the broader market might end the year on a high as consumer confidence numbers are due out today. A positive reading could send investors into the New Year confident as consumers are expected to be a key pillar of U.S. economic growth for 2020.
In all, it can be said that the Dow Jones and the stock market might close New Year’s Eve in the red as investors are possibly getting jittery about a potential market crash or correction in 2020.