Provided by Terry Garland and written by Indigo Marketing Agency, a non-affiliate of First Allied Securities, Inc.
People always want to know how the market is going to perform in the future. It’s understandable. After all, your portfolio’s performance determines the future quality of life for you and your family. Knowing (or at least having an idea) what the market might do can give us a sense of security or control.
But the reality is, when it comes to the market, there is no control. All we have are educated guesses. Sometimes they come close, other times they’re way off. So, as comforting as it is to start 2019 armed with knowledge to anticipate the market, it’s important not to fool ourselves into thinking we know exactly what will happen.
Nobody has a crystal ball to predict how everything will pan out in 2019. However, given what we know about markets and considering what is most likely, here is how we expect the market to behave in 2019.
The Fed Will Raise Rates In 2019
While this is no surprise to anyone paying attention to the Federal Reserve’s actions, it is important to note that we will be seeing additional rate hikes from the Fed in 2019. The last interest rate increase we saw in December 2018 had the target range for the Fed’s benchmark funds rate going from 2.25% to 2.5%. After that meeting, we found out that the Central bank officials now forecast two hikes this year, down from three rate raises previously projected.
It is important to note that the market saw dramatic drops during Secretary Powell’s press conference, hinting at investors’ worry about the Fed’s need to continue increasing rates.
What we must understand is that this process, where the Fed adjusts rates, is a normal and healthy component of what makes our markets go. By looking at GDP growth, unemployment rates, and other economic indicators, the Fed uses their policy tools to do their best in stabilizing the economy. Again, to the point that nobody can time the market, depending on what actions the Fed takes (and when), investors and markets will react accordingly.
Politics Will Heavily Impact The Markets
In addition to how markets respond to President Trump’s actions (and tweets), there are several major policy issues that have the potential to impact the markets in 2019.
First, we must certainly consider the trade war with China. The longer that this goes on without a resolution, the more investors will begin to get antsy. This will lead to fear, and we will see U.S. investors panic. We have already seen some of the impact that China can have on such a large company like Apple, and we can only imagine what other impacts we will see that have the potential of stemming from trade war-related companies.
Next, with the election of 2020 looming, it will be interesting to see how the markets respond to the future candidates that come to the surface. We’ve recently heard that Elizabeth Warren is most likely to put her bid in for 2020. While just knowing the future candidates does not necessarily affect markets, the campaign messages and key policy initiatives that come through the woodworks during 2019 do have the potential to impact investor behavior.
Next Steps
It’s true. There are tough times on the horizon. They may not hit in 2019, but they’re coming. However, that’s no reason to panic. There are ways you can protect yourself (and even benefit) from the coming recession. It all comes down to knowing how to handle yourself when the market finally collapses. If you’re interested in working with a financial advisor to make sure you’re well-positioned to sustain—and even thrive in—the coming economic downturn, call us today at (515) 226-0115 or email info@garlandandassoc.com.
About Terry
Terry Garland is the founder and CEO of Golden Capital Management with more than 25 years of industry experience. He works with individuals, small-to-medium-sized businesses, and medical professionals, including physicians and dentists, allowing them access to a wide variety of specialized services and investment vehicles to fit their specific needs. He graduated from Drake University and attended the Wharton School at the University of Pennsylvania and is a certified wealth strategist and a registered principal. With offices in Des Moines, Iowa, and Carlsbad, California, he serves clients across the country. Learn more by connecting with Terry on LinkedIn.