Broker Check

Growth Amid Uncertainty Marks the Year Ahead

| January 22, 2019

According to pundits, 2019 either has recession written all over it, or it will be a great year.

Not to discredit pundits and their accolades, but it’s important to realize headline news often has an underlying agenda. Plus, fear sells. There’s a reason for the saying, “If it bleeds, it leads.”

At Cornerstone Financial Services, we deal in facts and objective reasoning. And the truth is, the data on 2019 tell a story of a bumpy ride, but upward trajectory, nonetheless.

2019 Overview

We’re forecasting another year of 3 percent economic growth, with continued low jobless rates not seen since the 1950’s. Inflation-wise, things should remain steady, with 2 percent inflation for the year, though it might climb to 2.5 percent. And our projections also include an oil price rebound, along with real gross domestic product (GDP) growth of 3 percent.

As for the stock market, the trickiest part is what the Federal Reserve will do with interest rates. While four rate increases make economic sense, two increases seem more realistic since the Fed doesn’t want to invert the yield curve. Two hikes should get the 10-year yield curve to around 3.4 percent.

Financial modeling indicates the S&P 500 could reach 3,100, which would be a very bullish 25 percent gain over 2018. As such, capitalized profit models would scream, “BUY!” based on economic growth, GDP growth and interest rates. But trade headwinds, like tensions with China, European contraction, and U.S. political uncertainty, could temper those expectations.

That said, even if halved, we’d still see 12.5 percent growth in the S&P 500. So from a fundamental perspective, the market is underpriced and can grow in 2019, even though day-to-day movement could be frustratingly volatile.

Overall, we expect a choppy 2019. There will be volatility. But we’ll also see growth.

Securities offered and sold through CoreCap Investments, Inc., a registered broker/dealer and member FINRA/SIPC. Advisory services offered through CoreCap Advisors, Inc., a registered investment advisor. Cornerstone Financial Services and CoreCap are separate and unaffiliated entities.