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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

Reports: CIA finds "Havana Syndrome" unlikely caused by foreign campaign

CIA Director William Burns testifies during a Senate hearing on Capitol Hill last April. Photo: Saul Loeb-Pool/Getty Images

A preliminary CIA report rules out a foreign global campaign as the cause of American and Canadian diplomats affected by a mysterious illness known as "Havana syndrome," per multiple reports.

Why it matters: Some lawmakers had suggested the sometimes debilitating illness was due to directed energy attacks. But CIA officials told the New York Times that most of the 1,000 cases reported to the government could be "explained by environmental causes, undiagnosed medical conditions or stress." This finding has angered some victims, per the NYT.

Jan. 6 panel subpoenas 2 far-right "America First" activists

The House panel investigating the Capitol riot, from left; Reps. Bennie Thompson, Liz Cheney, Adam Kinzinger and Jamie Raskin on Capitol Hill in December. Photo: Drew Angerer/Getty Images

The House select committee investigating the Capitol riot issued subpoenas Wednesday for far-right leaders Nick Fuentes and Patrick Casey, who allegedly encouraged followers to go to D.C. and challenge the 2020 election results.

Why it matters: The action underscores the panel's increasing focus on rallies held ahead of the Capitol attack and how extremists were drawn to former President Trump's baseless claims of widespread voter fraud, per the New York Times.

Democrats fail to change Senate rules to pass voting rights bill

Senate Majority Leader during a news conference in Washington, D.C., on Wednesday. Photo: Alex Wong/Getty Images

Democrats failed Wednesday night to change Senate filibuster rules to pass the voting rights bill, with Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (D-Ariz.) voting with Republicans.

The big picture: The failed effort came after Senate Republicans blocked the voting rights measure from coming to a final vote earlier Wednesday.