REAL ESTATE
FINANCIALS
UTILITIES
CONSUMER STAPLES
COMMUNICATION SERVICES
INDUSTRIALS
CONSUMER DISCRETIONARY
INFORMATION TECHNOLOGY
MATERIALS
HEALTH CARE
ENERGY
ESTIMATED GROWTH IN OPERATING EARNINGS PER SHARE, 2019Ð2020
32.3%
21.8%
19.2%
15.2%
14.8%
14.1%
11.2%
7.4%
7.1%
–2.6%
–11.7%
S&P 500
ALL SECTORS
11.4%
SOURCE: S&P GLOBAL
A
134
FORTUNE.COM // DECEMBER 2019
AMERICAN STOCK MARKETS keep hitting heady new highs. So why are
investors acting as though the sky’s about to fall?
Yes, the S&P 500 has eclipsed the vaunted 3,000-point barrier
several times over the past year. The same applies to the Dow Jones
industrial average, which has regularly breached the 27,000-point
level. Those high-water marks have instilled some observers with
confidence that the current bull market has room yet to run.
Yet the myriad ups and downs between those highs tell a dif-
ferent story. As of mid-November, the market was up only slightly
from peaks it reached way back in January 2018. And volatility has
become the new status quo. Through October, there were 37 days
this year on which the S&P 500 moved either up or down 1% or
more, compared with only eight such days in all of 2017—a sign
that many shareholders are antsy to punch their “sell” buttons.
This dynamic is fueled by macroeconomic headwinds, including
the ongoing trade wars between the world’s two largest economies
and signs of a slowdown in global growth. All it takes is a White
House Twitter update or an off-the-cuff remark by a Fed governor
to send major indexes soaring or sinking. It’s been enough to make
some investors retreat from equity markets
altogether; in September, AllianceBernstein
reported that investors had pulled a record
$1.1 trillion out of stocks in the previous 12
months, moving most of that money into
bonds and money-market funds.
“Broadly speaking, the market has traded
flat to modestly up” for almost two years, “and
the level of optimism has declined dramati-
cally,” says Andrew Slimmon, managing direc-
tor and senior portfolio manager at Morgan
Stanley Investment Management.
Going into 2020, further uncertainty
abounds. A U.S. election of enormous con-
sequence could remake U.S.-China trade
relations, the regulatory climate for financial
services and health care, and much more of
the economic landscape. And it remains to be
seen whether the Federal Reserve’s multiple
rate cuts in the latter half of 2019 (along
with similar accommodation by other central
banks) will help sustain the longest economic
expansion on record. “Will that be enough to
turn around the slowing growth?” asks Saira
Malik, head of global equities at Nuveen.
“Or are we entering this period where that
slow decline will continue until it eventually
becomes recessionary?”
Faced with that question, most investing
pros shy away from the “R” word. None ofProfitable Prognosis Analysts expect the health care sector to be among the top earnings growers in 2020.