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Illustration: Eniola Odetunde/Axios

Investors can expect higher stock prices but also a lot of potential potholes in 2020, according to the investment forecasts of major asset managers.

What they're saying: "[I]n 2020 the margin for error — and opportunity — will likely be as small as it’s been in a very long time," top strategists at State Street Global Advisors wrote in their 2020 outlook.

  • "We foresee ... a stock market that grinds higher, but downside risks are building," JPMorgan Asset Management's outlook said.
  • "We remain concerned about the risk/reward of the S&P 500 near term," noted UBS in its outlook.
  • "We expect a positive return for 2020, but muted," BlackRock's CIO of fundamental U.S. equities Tony DeSpirito said during a recent media briefing.

Threat level: Managers are predicting the U.S. will avoid a recession. But most say the biggest risk to that is the U.S.-China trade war, which could be ratcheted up at any second by a tweet from President Trump.

  • Outlooks also noted the risks of a recession in Europe, steadily declining U.S. profit margins, weakening global aggregate demand, a labor market slowdown, the 2020 U.S. presidential election, and the positive effects of the 2018 U.S. tax cuts fading.

The U.S. consumer was responsible for the lion's share of growth this year, as CEOs have lost confidence and corporations have pulled back and will need some help in 2020.

  • "Falling corporate profits, additional tariffs scheduled for mid-December and Fed rate cuts likely on hold for a little while may make it tough for the consumer to continue to shoulder this larger burden," State Street said in its outlook.

The big picture: None of these major asset managers predict a resolution to the trade war next year, but they almost uniformly expect a de-escalation. That will allow the U.S. economy to grow somewhere between 1.5% and 2% next year and continue to add jobs.

  • Such an environment is expected to support far-improved earnings growth near 10%.
  • It will have to, said Charles Schwab chief investment strategist Liz Ann Sonders. "The wide gap between stock market performance and corporate after-tax profits suggests the latter needs to accelerate."

Be smart: Few money managers gave an explicit S&P 500 target, but top strategists at John Hancock, Jeffries, Bank of America Securities and others predict the stock market rises only about 5% from its current level.

  • Goldman Sachs analysts were the bullish outliers, predicting the S&P rising to 3,400 by year-end and U.S. growth between 2.25% and 2.5%.
  • Even Macquarie, which projects U.S. stocks doubling in value by 2030, said they see the S&P only at 3,300 by year-end.

Go deeper:

Go deeper

CPAC Republicans choose conservatism over constituents

Rep. Matt Gaetz. Photo: Elijah Nouvelage/Bloomberg via Getty Images

CPAC proved such a draw, conservative Republicans chose the conference over their constituents.

Why it matters: More than a dozen House Republicans voted by proxy on the $1.9 trillion COVID-19 relief bill in Washington so they could speak at the Conservative Political Action Conference, known as CPAC. And Sen. Ted Cruz skipped an Air Force One flight as President Biden flew to Cruz's hometown of Houston to survey storm damage.

Border Democrat warns Biden about immigrant fallout

Henry Cuellar (right). Photo: Tom Williams/CQ-Roll Call Inc. via Getty Images

A Democratic lawmaker representing a border district warned the Biden administration against easing up too much on unauthorized immigrants, citing their impact on his constituents, local hospitals and their potential to spread the coronavirus.

Why it matters: Rep. Henry Cuellar (D-Texas) told Axios he supports President Biden. But the moderate said he sees the downsides of efforts to placate pro-immigrant groups, an effort that threatens to blow up on the administration.

In CPAC speech, Trump says he won't start a 3rd party

Trump at CPAC on Feb. 28 in Orlando, Florida. Photo: Courtesy of C-SPAN.

In his first public speech since leaving office, former President Trump told the audience at the Conservative Political Action Conference (CPAC) that he would not start a third party because "we have the Republican party."

Why it matters: The former president aims to cement himself as Republicans' "presumptive 2024 nominee" as his top contenders — including former members of his administration — face the challenge of running against the GOP's most popular politician.