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'We're going to spend all of 2020 talking about the 3 E's': strategist

As the United States and China inch closer to signing a ‘phase one’ trade deal, investors once again find trade at the center of market conversation. Bank of America Private Bank Chief Investment Officer and senior investment strategist, Marci McGregor, joined Yahoo Finance The Final Round to discuss how trade, among other themes, will define market action in 2020. 

Despite the influence of trade talks on markets throughout 2019, McGregor believes 2020 will focus instead on what she calls the three E’s: earnings, the economy, and the election. 

“We’re entering an election year with heightened political uncertainty because of a lot of the issues we've had, you know, again, around trade, around Syria, North Korea, the situation in Iran,” said McGregor. “When you have heightened uncertainty heading into an election year, I think you can get more volatility than is normal. Typically, volatility picks up in an election year, call it August, straight through into November. I think you could see a pickup maybe in the back half of February. The market hasn't paid attention. Sectors have, but the overall market hasn't dialed into the election yet.”

Headwinds turning into tailwinds

Trade negotiations between the U.S. and China swayed markets heavily last year, triggering much of the volatility investors saw throughout the year. While McGregor doesn’t anticipate trade will improve dramatically in 2020, she’s nonetheless optimistic that it will have a more positive impact on markets than in 2019.

“I think towards the end of 2019, sentiment started to latch onto a growth story…growth picking up in 2020, not just here in the U.S., but growth globally,” said McGregor. “I think sentiment has carried the market a long way. We need to see earnings pick up.”

“If we saw roughly 2% earnings growth in 2019 we’re looking for it to lift to 8% in 2020,” she said, adding that “while that’s a significant increase from 2019, it's still below the kind of post-crisis earnings growth we've seen for the last 10 years. So we're not looking for anything heroic, but we want to see optimism shifting, some of the big headwinds from 2019 — think not only trade, but Brexit and things like that shifting and turning into tailwinds for the market.”

Olivia Balsamo is a producer for Yahoo Finance.

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