Steady as she goes

A presidential election. International trade conflicts. Fear of recession.

There are plenty of circumstances that could shift the stock market and shake up investments in 2020.

Yet consumers should not allow developments nationally and globally to influence their investment choices, say some Virginia wealth advisers who are listed as America’s Best in State for 2020 by SHOOK Research. Though some events are significant, making financial decisions based on emotions is not a sound move, they say.

“If it’s an election year or if you like the candidates or not, those [factors] have a short-term impact on investment,” says Kim Luu-Tu, a private wealth adviser with Ameriprise Financial Services Inc., and CEO of Generations Wealth Management, a division of Ameriprise, in Vienna. “When you are making decisions, you have to be unemotional.”

Luu-Tu and other financial advisers predict another bull market in 2020. It would be the 11th consecutive year for a bull market — the longest stretch in the country’s history. (The average bull market lasts about 4.5 years.)

“We are in a very positive period economically,” says Paul Pagnato, founder and CEO at PagnatoKarp, an independent wealth management firm in Reston. “I think the markets will continue to be robust and be abundant in all asset classes.”

Similarly, in Bankrate’s 2019 Fourth-Quarter Economic Indicator survey, financial experts estimated that there is a 35% chance that the U.S. economy will enter a downturn between now and the November presidential election. That is a decrease from 41% in the survey’s previous quarter, revealing growing optimism in the financial market for 2020.

Stay the course

To be sure, that doesn’t mean that investors should throw caution to the wind when it comes to taking risks and making strategic investments, Pagnato says.

“The guidance we give clients is to be true to themselves and the plan that they’ve done,” and don’t let ephemeral market changes dictate decisions, he says. “It’s really important to stay the course with a plan.”

Some industries are stronger than others for investment this year, advisers say.

Technology companies performed well last year and are likely to continue at that pace, says John Higgins, managing director of investments at the Higgins Private Wealth Management Group of Wells Fargo Advisers in Charlottesville.

Biotechnology is another attractive industry from a valuation standpoint, says Luu-Tu.

“You have to be very selective at this point,” she says. “If you consider being more diversified and tactical, you should look at industries that are opportunistic.”

Emerging fields within tech and biotech, such as cloud computing, genomics, autonomous driving and 3D printing, are also strong, Pagnato says.

“We love what we call disruptive innovations,” he says. “We love the sectors and the industries and the companies that are growing exponentially and are able to take advantage of the massive computing power that we have.”

Pagnato cautions consumers about investing in the energy sector, big banks and the traditional automobile industry because of rising competition from newer, more efficient concepts, from solar power to electric vehicles.

“We’re in a period of time where you have to take risks as a company,” he says. “You have to be innovating, you have to be experimenting. You need to be developing and employing and leveraging technology. If you don’t, your competitors are going to.”

Go global

It’s also a good year for consumers to consider investments in international stocks, rather than U.S. stocks. International stocks are at a historic price average, while U.S. stocks are over the historical average, says Wendy Payne, founding partner of Centurion Wealth Management in McLean.

In general, “the trend is it’s a good time to recalibrate your allocation” from the previous year to rebalance portfolio drift, she says.

Similarly, despite current global political tensions and trade conflicts, from a valuation standpoint, “you should be shifting some of your profits out of the U.S. and look for more attractive valuations anywhere you can find it,” says Luu-Tu.

But consumers should shy away from international investments in areas of the world that are experiencing active political unrest, such as the Middle East, she says. For those same reasons, oil as a commodity investment also may be volatile, she says.

Additionally, the results of this year’s presidential election could have a bearing on some future investment choices. Depending on which party wins the election, investors should be defensive in the industries that the winning party — Republican or Democrat — targets aggressively, Higgins says. Those industries could include health care or infrastructure-related investments.

Time to refinance?

Interest rates likely are a bright spot for the year. Mortgage rates already are low and Payne doesn’t believe the Federal Reserve will raise rates this year. In fact, 62% of economists in Bankrate’s Fourth-Quarter Economic Indicator survey says they expect the Federal Reserve to cut rates in 2020.

As of late January, 15-year fixed mortgage rates were 3.2%, while 30-year fixed rates were 3.7%, according to Bankrate.

“We have time before we will see some [rate] increases,” Payne says. “When we do get to that point, I am confident that there would be slow and steady increases.”

Refinancing is a smart investment move when rates are low, she says.

As consumers make goals for the year, they should evaluate what happened with their financial goals in the previous year, making sure that they replenish any savings that they used, says Nancy Popovich, managing director of Popovich Financial Group at Baird in McLean.

“My biggest fear is when people try to overcommit funds that they don’t have when the market has done well in the prior year,” she says. “Sometimes it’s hard to do. You are so excited to participate in the investments. Look back before you look forward.

“If you’re secure in what you need right now, you don’t have to worry about what’s going into the markets,” Popovich adds.

Storm on the horizon?

Overall, the key to smart investing is to be cautious when chasing big returns and making risky investment decisions, advisers says. Too often consumers decide to invest based on an investment’s performance in the past, Payne says.

But it may not be a good move now, she says. Consumers should be sure that their portfolio is well diversified.

Lately, more clients want to take risks by buying stocks at high prices, particularly after reading news articles predicting that there will not be a recession this year, says Luu-Tu.

“I am against taking more risks,” she says. “You can win more by losing less. The highest-return opportunity may not be the best approach. Sometimes taking lower risks until you get to keep more of what you want may end up getting you to the destination.”

Plus, she says, “I urge people not to look at the news every day.”

Even though the market is experiencing growth, consumers should be prepared for an eventual correction, Higgins says. His firm expects muted returns this year, with a 7% or 8% rate of return in the U.S. stock market.

“We are in the longest expansion in the United States’ history, and prices and valuations are getting expensive,” Higgins says. “This is the end of the market cycle that we’re in right now. Clients need to be tactical, with the understanding that maybe not this year, but the next year, a recession is coming.”

CHART: SHOOK top wealth advisers in Virginia