LPL 2019 Outlook is Here! After nearly 10 years of witnessing the U.S. economy and stock market recover-and thrive-investors are starting to wonder if we’ve seen all this expansion and bull market have to offer. At LPL Research, we believe there’s more room to run, and don’t expect an impending recession or bear market in 2019. However, it is a good time to start thinking about what the next phase for the economy and markets may look like. The intention here is not to start worrying or assuming the worst, but to remind ourselves that slowdowns and declines-even recessions and bear markets-are a normal part of our market cycle. And even more importantly, if we’re prepared for any downturns, we can be better positioned to weather any challenges that may be ahead. Get prepared with LPL Research’s 2019 Outlook, Fundamental – How to focus on what really matters (A how to guide), available now!
Key themes from the Outlook:
Policy. The Federal Reserve is expected to slow its pace of interest rate hikes next year, while fiscal policy should remain supportive of economic and profit growth. Uncertainty regarding trade policy remains a risk, although we expect an eventual resolution.
Expect volatility. Market volatility will likely persist in 2019, as investors digest the many forces impacting the economy, interest rates, and corporate profits. Focusing on the fundamentals and remembering the importance of diversification will be key to navigating any volatile times.
Look for an elongated cycle. Despite periodic slowdowns, business spending was solid in 2018 and is expected to remain so in 2019. Business spending remains a key factor supporting economic growth as we look for this cycle to elongate.
Economic and market forecasts for 2019:
U.S. economy. Consumer spending, business investment, and government spending should provide continued support for gross domestic product growth of 2.5-2.75%.
Interest rates and bonds. A rising rate environment may prove challenging for bonds, and we expect flat returns for the benchmark Bloomberg Barclays Aggregate Index. Our year-end 2019 forecast for the 10-year U.S. Treasury yield is 3.25% to 3.75%.
Corporate profits and stocks. Expectations for still-solid corporate profits and steady economic growth support our forecast of an 8-10% return for the S&P 500 Index. We forecast a 6-7% increase in S&P 500 earnings in 2019.
The week ahead. A slew of data is due out in the U.S., though the highlight of the week will be the Federal Reserve’s monetary policy meeting on Tuesday and Wednesday. A rate hike is expected, so market participants will instead be looking for any indication of the future path of the policy rate for 2019. In Europe, economic data is headlined by third-quarter GDP, along with producer price data, from France and the UK. In Asia, all is quiet out of China, though core inflation data from Japan will garner attention. Track these and other important events on our Weekly Global Economic & Policy Calendar.
- Building Permits (Nov, prelim)
- Housing starts (Nov)
- Germany IFO Business Climate (Dec)
- Japan Trade Balance (Nov)
- FOMC Meeting
- Existing Home Sales (Nov)
- UK PPI (Nov)
- UK CPI (Nov)
- Germany PPI (Nov)
- Japan Central Bank Meeting
- Initial Jobless Claims (Dec 15)
- Philadelphia Fed Index (Dec)
- Leading Indicators (Nov)
- UK Retail Sales (Nov)
- Bank Of England Meeting
- Japan Core CPI (Nov)
- Durable Goods Orders (Nov, prelim)
- Personal Income (Nov)
- Univ. Michigan Consumer Sentiment Survey
- Personal Consumption Expenditures
- GDP (Q3, final)
- Eurozone Consumer Confidence
- France GDP
- UK GDP