Bruce Bittles and William Delwiche – Investment Strategists at Baird, a middle-market, employee-owned financial services firm that is a century old – have provided a look ahead at what could move the market in the coming year in their 2019 Economic and Stock Market Outlook.
To summarize their outlook for 2019:
- Stock market conditions likely improve over course of the year with new cyclical bull emerging in second half.
- Federal Reserve shifting toward data dependency as interest rates approach neutral level.
- Economic growth expected to slow though domestic recession risk remains minimal. Upswing in productivity growth providing an unexpected tailwind for the economy.
- Earnings growth may have peaked, but that may not preclude expectations drifting higher, especially on signs of global economic recovery.
- Absent evidence of renewed inflation and improving global conditions, bond yields not likely to move meaningfully higher.
“This past year has been a departure from 2017 in many ways,” the Outlook reported. “The historical calm of 2017, with its maximum peak-to-trough drawdown on the S&P 500 of a measly 2.8 percent, faded. It was replaced with a return of volatility, and as of this writing in early December, the S&P 500 has experienced declines of more than three percent on five individual trading days in 2018.”
This may have caught some investors off guard, but it should not have been a total surprise.
In many ways, we have witnessed a return to a more normal volatility environment. Though, in other ways, 2018 was extraordinary.
According to Ned Davis Research, 2018 could go down as the first year since at least 1972 that no single asset class produced a return of more than five percent.
Click here to read more of Baird’s 2019 Economic and Stock Market Outlook.
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