2018 was a tumultuous year for markets. Stocks started the year strong but quickly erased early gains. President Donald Trump's ongoing trade war with China and threats of tariffs have spooked investors. Recent rate increases by the Federal Reserve, soft economic data and a series of congressional hearings with big tech CEOs have also deepened market uncertainty.
Will 2019 bring the return of a bear market? A possible recession? Or will stocks rebound once more? Here are five predictions for market performance in 2019
Goldman Sachs Has Cut its Forecast for First Half of 2019
Investment bank Goldman Sachs cut its stock market predictions for the first six months of 2019, citing weak economic data and increased uncertainty. It also said that growth would slow to 2 percent next year. The company said its altered forecast stemmed from precaution, not broader fear for the economy. The bank is "still not particularly worried about a recession."
Instead, Goldman analysts said that 2019 would be about "landing the plane."
"In our view, a growth slowdown is necessary to 'land the plane' and the two key historical risk factors—inflationary overheating and asset market bubbles—remain largely absent," they wrote.
A Strong Dow in 2019
Ken Fisher, founder and executive chairman of Fisher Investments, wrote in an opinion piece for USA Today that he sees stocks rising between 15 and 25 percent in 2019, a very healthy gain.
The gains to the market will come as a result of recent soft economic data, said Fisher. "Whenever you're in a recession, and it's widely recognized, stocks always rise. Sounds weird! But stocks are a leading indicator," he wrote. "They tumble before recessions start, then rebound while the economy keeps sinking. And the aftermath of their bad returns is strong returns."
Expect Modest Gains in Large-Cap Stocks
Sebastien Page, head of T. Rowe Price's global multiasset division, predicts 2019 will bring small but positive gains to large-cap stocks. His prognostications largely stem from the Federal Reserve's recent decision to raise interest rates.
"Even though the Fed has been clear about expectations of further rate hikes in 2019, rates are still remarkably low from a historical perspective. We've never had a recession with rates that low," he told Investor's Business Daily. "In terms of expected returns for large-cap equities, the central scenario with higher volatility is mid- single-digit earnings growth and modest P/E contraction adding up to very modest, but still positive, returns."
Earnings Growth of 6 to 7 Percent
Growth in the U.S. is slowing, but it's still positive, Chris Hyzy, chief investment officer at Merrill Lynch said in a note to investors. He expects to see earnings growth between 6 and 7 percent in 2019, due mostly to consumer spending. "This should support corporate earnings growth of 5 percent to 6 percent or better for next year," he said. "And we continue to favor equities."
If the president comes to a trade agreement or the Fed indicates that it will back off on raising rates, things will grow at a faster clip, Hyzy said.
The S&P 500 Will Hit 3,100
Citigroup's Tobias Levkovich has called for a gain of about 600 points to the S&P in 2019, as Citi's model forecasts a 90 percent probability that stock prices would increase next year.
"We have argued that rising inflation expectations and higher bond yields next year require a different investor mindset given long-term historical patterns," Levkovich wrote in a note. "2019 should provide investors with a more positive return outcome given an improved risk/return scenario."
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
About the writer
Nicole Goodkind is a political reporter with a focus on Congress. She previously worked as a reporter for Yahoo Finance, ... Read more
To read how Newsweek uses AI as a newsroom tool, Click here.
