2019 Investment Outlook – January Newsletter

Our January newsletter focuses on the 2019 Investment Outlook, which we hope you find value reading.  In addition, we provide the latest monthly commentary from Pacific Asset Management. 

2019 Investment Outlook

2018 was a challenging year for all investors with global equity markets having their worst year since 2008.  Signs of global economic slowdown, rising interest rates in the US, trade war between the two largest economies, and political uncertainty (including Brexit) all played roles in the 2018 downturn.  Moving ahead to 2019, what can we all expect?

We have researched many of the investment and economic outlooks available and have found a wide range of views for what 2019 has in store.  Here is a great article from Bloomberg providing a reader’s digest of the major Wall Street firms’ outlook for the year ahead:

https://www.bloomberg.com/graphics/2019-investment-outlooks/

Considering 2018’s negative return for the S&P 500, what are the odds that 2019 will also be a down year?  Based on historical data going back to 1928, there were 4 instances (2001, 1974, 1940, and 1930) where the S&P 500 was negative two consecutive years.  There were 12 times where the S&P 500 was positive in the year following a negative year.  Based on this data, the odds of a negative S&P 500 in 2019 is 25%, which appears promising.

However, many if not all the conditions (economic slowdown, rising rates, trade wars, political uncertainty) that caused 2018 will likely persist into 2019.

The common themes to be aware of are listed below:

  • The US/global economy is in the mid-to late part of an economic cycle.  Eventually, like all economic cycles, there will be a recession. 
  • We can reasonably expect a moderate recession as soon as 2020.
  • Discipline around diversification and rebalancing will be important in 2019
  • Equity investors can reduce risk by focusing on quality, larger cap stocks in historically defensive sectors.
  • Before this cycle is finished, equities can still deliver a period of significant out-performance versus fixed income
  • Within fixed income, investors should focus on higher quality debt, avoiding high yield (junk) debt
  • To be clear, the challenges ahead don’t appear to have the makings of another financial crisis

Pacific January Monthly Commentary

Our partners at Pacific Asset Management share their latest Market Commentary.  Please click the link below to read the latest monthly commentary:

PACIFIC ASSET MANAGEMENT – JANUARY COMMENTARY

Please contact us if we can be of further assistance.

Everyone at Touchstone wishes you a happy, healthy, and prosperous 2019!