2018 was not a good year for the stock market. All three major indexes were down more than 1% for the first time in a decade, and just the second time in the last 16 years. Most major sectors fell double digits, with only software stocks (+11%) and healthcare stocks (+3%) gaining any ground. Fortunately, as you will see from my five stock market predictions below, I think 2019 will be a much better year.
That said, I doubt it will be smooth sailing. Even though the year ended with a decent bounce, including record point gains in the Dow Jones Industrial on Boxing Day, it’s still plenty volatile out there. Until calm is restored—and by that I mean no more wild swings of 5% up one day and 2% down the next—I wouldn’t trust that the worst is behind us. It’s entirely possible we haven’t hit bottom yet. By the end of January, we should know the answer.
What will happen over the ensuing 11 months? Here are my five stock market predictions for 2019:
Five Stock Market Predictions for 2019
1. U.S. stocks will rebound, if only marginally so. U.S. markets haven’t had back-to-back down years since the 2000-2002 dot.com bust—and that includes the 2008-09 recession. In fact, that was the only time since 1975 that the S&P 500 has fallen in consecutive years. With the U.S. economy in a much better position than it was 10 years ago, and with investor participation prior to the fourth-quarter market correction nowhere near where it was during the turn-of-the-century Internet boom, there’s no major reason for stocks to stay down long. They usually don’t. It takes extreme historical events like a global recession and an Internet bubble bursting to buck that trend. I don’t foresee either of those happening in 2019.
2. Chinese stocks will be up double digits. The benchmark Shanghai Composite Index was down roughly 25% last year, thanks in large part to the negative impacts of the ongoing trade war with the U.S. I’m betting those trade concerns are mostly baked into the cake at this point, and Chinese stocks—ever volatile—tend to alternate between down years and up years. While the country’s GDP growth has slowed some, the 6.3% growth expected in 2019 still puts it among the fastest-growing economies in the world. It’s also evidence that the trade war isn’t exactly causing China’s growth to crater. Down double digits in two of the last three years, I say Chinese stocks bounce back in a big way this year. (To find the Chinese stocks poised to have the biggest years, I highly recommend subscribing to our Cabot Emerging Markets Investor advisory, where new chief analyst Carl Delfeld has some great buy-low opportunities—in China and beyond—in mind.)
3. The Fed won’t raise interest rates even once. I can’t take credit for this prediction; it came from Chloe Lutts Jensen, former chief analyst of our Cabot Dividend Investor advisory. After four rate hikes last year (the most since 2006), and another three the previous year, the Fed will slam on the brakes in response to reports of slowing growth, a stagnating housing market, and, yes, the stock market’s big decline.
4. You won’t hear or see the word “Bitcoin” much. A year ago at this time, it was all the rage, with Bitcoin prices having just topped out near $19,000 per unit—up from a mere $1,000 per unit at the start of 2017. Now Bitcoin has crashed, and is down below $4,000 per unit. And you don’t hear much about this or other cryptocurrencies anymore. I don’t want to say we told you so, but…
5. Most of Cabot’s advisories will outperform the market. Okay, this one isn’t so much a stock market prediction as a shameless plug for my company’s impeccable investment advising prowess. But the proof is in the pudding—we’ve survived for nearly a half-century (since 1970!) in this business because we’ve helped our readers make a LOT of money. Perhaps more importantly, we’ve helped our readers avoid losing much money—and that was especially key last year, when our more aggressive growth advisories such as Cabot Growth Investor and Cabot Emerging Markets Investor went to at least 75% in cash. The best way to hang on to your money is to get out of market crashes like the one we saw in 2018. Once the market gets going again, you can put that money to work, buying low on some great growth stocks and laughably undervalued stocks.
If you want to know which ones to buy—and when it’s safe to start buying stocks again period—click here to learn how to subscribe to any of our 12 investment advisories. You won’t be disappointed. That’s one prediction I feel pretty certain of.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!