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Joined: 28 Dec 2005 Posts: 11965
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Posted: Sun Jan 13, 2019 5:08 am Post subject: * 2019 Stock Market Forecast * |
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The output gap hasn’t closed. The country hasn’t reached full employment. If the output gap was closed, roughly 100,000 jobs per month would be created. However, over 200,000 jobs per month, on average, are being created. Moreover, wage growth would be much faster, i.e. over 4% rather than a little over 3% a year. Also, the fiscal stimulus is diminishing, while the Fed was tightening the money supply. Therefore, the monetary tightening can be on hold in 2019, since accelerating inflation is unlikely. The Fed may need to ease the money supply in 2020.
The Fed is reversing QE by allowing $50 billion in bonds each month to run off its balance sheet. Corporate debt and leveraged investments are high, along with higher interest rates. The economy and corporate earnings growth are expected to slow. The stock market had a huge run-up, since 2009. There was much technical stock market damage in the final three months of 2018.
Conclusion: In the near term, there may be a test of the December low. However, that may be an excellent buying opportunity, because inflation will not derail economic growth. It’s likely, the stock market will reach its previous high in 2019. Although, the economic expansion will be 10 years old this year, they die from excesses, not old age. I expect orderly adjustments in 2019 to where the stock market reaches its 2018 high. |
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