By the end of this week we’ll be investing in a new year and a new decade.
I think 2020 will be quite different to 2019 and the 2020s will probably be very different to the 2010s.
The past decade has been one of the strongest performing periods for US shares in history, which is why iShares S&P 500 ETF (ASX: IVV) has performed so well. But I wouldn’t expect the same over the next decade.
In 2020 I think we will see the trade war come to an end. I believe both Donald Trump and the eventual Democratic candidate will want a deal with China so that it looks good politically for them and should be good economically for the US as well. This is one of the main reasons why I expect Vanguard FTSE Asia Ex Japan Shares Index ETF (ASX: VAE) could be one of the best performing exchange-traded funds (ETFs) next year after the trade troubles.
Interest rates are probably not going to go much lower. Indeed, we may see interest rates go up in 2020 in Europe and the US. Banks are complaining about negative interest rates in Europe, so I wouldn’t be surprised to see rates rise there. The US economy is in extremely strong health which should mean higher interest rates, particularly with the trade war settling down.
We should always be wary of overpaying for shares. On the ASX I think the valuations of some of the very promising businesses will be tested. Shares like Afterpay Touch Group Ltd (ASX: APT) will need to deliver on the growth expectations built into the share prices.
I think there are some very exciting growth shares that are a little misunderstood by the market and therefore mispriced. I believe two of the shares that could perform very strongly in 2020 are Webjet Limited (ASX: WEB) and Pushpay Holdings Ltd (ASX: PPH).
Looking at the blue chip end of the ASX, banks like Westpac Banking Corp (ASX: WBC) will be under pressure to return to profit growth after a tough FY19. Most of the banks have been reporting higher and higher mortgage arrears in recent years. If 90+ day arrears continue to rise it could lead to painful bad debts. But, 2020 could also see a return to credit growth.
Popular dividend shares like Transurban Group (ASX: TCL) and Sydney Airport Holdings Pty Ltd (ASX: SYD) continue to grow their income for shareholders, however I’m wary of putting capital at risk just for a few percent of income.
Agriculture businesses with yield could be good shouts whilst the intense drought is ongoing. I’m thinking of ideas like Rural Funds Group (ASX: RFF) and Duxton Water Ltd (ASX: D2O) with their growing payments to shareholders.
Or, we could go for a long-term, conservative investor like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) which has proven to generate good returns in good or tough times.
Whatever happens this year, I think these top ASX shares could be some of the best performers.
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Tristan Harrison owns shares of DUXTON FPO, RURALFUNDS STAPLED, VANGUARD FTSE ASIA EX JAPAN SHARES INDEX ETF, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of AFTERPAY T FPO and PUSHPAY FPO NZX. The Motley Fool Australia owns shares of and has recommended RURALFUNDS STAPLED, Sydney Airport Holdings Limited, Transurban Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended DUXTON FPO, PUSHPAY FPO NZX, and Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.