A graphic with a phone that displays stocks charts and chart candlesticks. The graphic also reads, weekly viewpoint, and the future of investing.

Daydreaming about the future these days? We are too.

We can’t wait to get back to restaurants, concerts and carefree travel. You know, the good old days.

But we’re also thinking about what lies ahead for our portfolios. This week, in honor of our upcoming digital conference, “The Future of Investing”, we thought we’d talk about some of the biggest trends we expect to see in the stock market over the next few years.

Some of our predictions have us reminiscing about the good old days. But others have us looking forward to what lies ahead.

The graph illustrates the occurrences of a 10%+ drop of the S&P 500 from 2010 through 2020. There have been eight S&P 500 selloffs of 10% or more since 2000. The 20% decline in early 2020 was the fastest in history, followed by the second-fastest recovery.

Quicker drops, quicker recoveries.

Things move a bit faster in the stock market these days. The S&P 500 posted its fastest 20% decline in history as the coronavirus pandemic tore through the U.S. Then, stocks followed up that swift drop with their second-fastest recovery, back to the old high.

Year-to-date, the S&P 500 has moved 1% or more in 47% of all trading days, the most since 2008. And stocks are still up in 2020. What a rollercoaster.

Buckle up, because we don’t expect the market to slow down any time soon.

Technological advances have been key to increasing the speed of the market. We’re also living in the age of social media, so the dissemination of news and information happens more quickly these days. Mathematical algorithms have been created to keep up with the speed and amount of data that comes out. Together, these can lead to bigger market swings in both directions as headlines come out.

Investors may also be quicker to buy the dip in a crisis. Why? The Federal Reserve has proven it’s willing to take decisive action to help the economy and maintain an efficiently operating market. After all, the Fed (and the government) effectively stopped the decline in March and saved the economy from a much deeper recession.

The market could expect the same actions from now on. Plus, with barriers to entry being broken down for individual investors, they too could be frequently tempted to buy in.

Another IPO wave.

It’s been a hot year for companies going public. About $71.8 billion in new public company shares have started trading in 2020, the highest total since at least 1990. And the year still has two and a half months left.

Investors are gobbling these initial public offerings (IPOs) up, too. This year, about 66% of all IPOs have climbed on their first day of trading, including every IPO larger than $1 billion (this year has also had its fair share of IPO losers).

We think the IPO party could rage on as long as investors are willing to buy in and the market continues to chug higher. There’s been an influx of startups over the past decade and going public is the next life stage for many of them. And everybody wants that sweet public market capital and a chance to ring the New York Stock Exchange bell. There could also be a lot of interest from investors if economic growth picks up. After all, the popularity of IPOs tends to ebb and flow with the economy.

The graph illustrates the IPO activity in billions of dollars from 1990 through 2020. Attention is being drawn to 2020, which has seen $71.8 billion in IPOs through October 9th, the highest amount on the graph.

Dividend stocks rise again.

Treasury yields are near record lows, and it looks like they could stay rock bottom for a while. Many investors want regular income from their investments, too. There aren’t many options for a good, consistent payout these days, and we’re all getting a little desperate for yield.

Enter dividend stocks. S&P 500 companies are paying out a 1.7% average dividend yield right now, nearly 1 percentage point higher than the 10-year Treasury yield. And the S&P 500’s “dividend aristocrats”, or high dividend stocks, are yielding 2.7%. Not too shabby in this environment.

Despite that, dividend stocks haven’t been popular this year. The S&P 500’s “dividend aristocrats” have dropped 0.5% so far this year, compared to the S&P 500’s 7.8% gain. For the first time since 2017, a handful of S&P 500 companies announced reductions or suspensions of their dividends in the second quarter of 2020, which led to some avoiding dividend stocks entirely. Companies belonging to struggling sectors like energy have cut dividends, but other stable mega-cap companies have continued to raise their dividends.

Investors could be worried that there’s still a chance companies cut their dividend payments amid lingering economic uncertainty. We understand the concern, but we think the market is past the worst of the dividend-slashing.

ESG investing booms in popularity.

Investing in causes, organizations, and missions has been a growing trend these past few decades. But now, we’re at a pivotal point for societal change, and ESG (environmental, social, governance) investing has become a hot space for investors wanting to back the causes they’re passionate about. In fact, at Ally Invest, we’ve seen the number of accounts holding positions in ESG funds more than double since the start of the year.

People want to support companies making a difference in their communities, their countries, and internally with their employees. The government is focusing more on ESGs, too. As such, it will become more common to see policies requiring companies to disclose everything from corporate and board diversity, to carbon emissions, to supply chain initiatives and more.

And contrary to what most people believe, ESG companies can positively impact your portfolio. ESG stocks, measured by the MSCI USA ESG Leaders Index, have done better than the S&P 500 for the past two years, and they’re on track to outperform in 2020.

ESG investing has been around for a while, but there’s still lots of innovation ahead. We expect interest in ESG stocks to increase as the benefits of ESG become clearer through improved reporting standards and methods. We believe we are still in the early stages of an investing trend that’s here to stay.

Jump into our time machine.

We believe there is a lot to look forward to in 2020 and beyond. Exciting changes in both finance and the world will create unique investing opportunities, but the basics of investing will stay the same. As always, don’t lose sight of your dreams and goals when choosing where to put your money.

Want to learn more about what we and other experts see in the future? Join us for “The Future of Investing,” an Ally Invest digital conference, on October 22. We’ll be speaking to pros like Acorns’ Jeffrey Cruttenden and ConsenSys’ Lex Sokolin, about what’s trending today and how today can shape tomorrow.

Speech bubble icon next to text "Expert Take"

Headshot of Lindsey BellLindsey Bell is Ally’s Chief Investment Strategist, responsible for shaping the company’s point of view on investing and the global markets. She is also President of Ally Invest Advisors, responsible for its robo advisory offerings. Lindsey has a broad background in finance, with experience on the buy-side and sell-side, in research and in investment banking and has held roles at JPMorgan, Deutsche Bank, Jefferies, and CFRA Research.

Lindsey holds a passion for teaching individuals how to become successful long-term investors. She is a contributor at CNBC, and frequently shares her insights with various publications including the Wall Street Journal, Barron’s, MarketWatch, BusinessInsider, etc. She also serves on the board of Better Investing, a non-profit organization focused on investment education.