If you read the commentary and predictions of many of the top financial and economic gurus of our time such as Jeffrey Gundlach and Federal Reserve Chairman Jerome Powell, you can find some familiar themes and ideas.
In recent days there have been comments that indicate that 2019 may be an interesting year to sell and buy investments.
Here are some of the key insights that will keep investors both motivated and concerned in 2019:
- The Federal Reserve has raised rates 9 times in this present economic cycle since Dec. 2015.
- We have our first trade war in memory. If it is resolved, the market could improve in both the U.S. and China.
- In 2018, emerging markets were down 14% in or more according to the Economist magazine and other sources.
- Some overseas stock markets were hit hard last year such as China, Germany, Mexico, and others.
- The sustained annual U.S. deficit is now believed to be more than $1 trillion primarily due to paying interest on the new debt created by President Barack Obama.
- Corporate debt of major companies is a concern.
- Gold prices have risen to $1,287 per ounce, moving upward from August lows of $1,176.
- Federal Reserve Chairman Jerome Powell reiterated that the central bank can be patient on policy and can act "flexibly and quickly" if data warrants it.
- Powell also said other recessions were created by the Fed having to “hit the brakes” to slow inflation or “asset bubbles.” Right now, the Fed doesn’t see evidence of either.
- Quantitative tightening by the Federal Reserve may continue. Analysts are still predicting another few hikes in the next 2 years.
- Analysts still see a 4% or higher GDP growth in 2019 according to Barron’s.
- There is a bifurcated economy. On one hand, you have break out companies in technology while other brick and mortar companies going bankrupt at the same time.
- There was a 3% wage growth and unemployment below 4% in 2019.
- BankRate is showing CD rates at around 2.7% if you sign up for a 2-5 year term.
- Some investors are betting on nations surrounding China to benefit from the trade war such as Vietnam, South Korea, Indonesia, Malaysia, and Philippines.
- BREXIT may still affect the entire EU community and the UK’s global companies.
- Better border and drug control policy is predicted to save from 50-200 billion per year in health care and public assistance costs. Over 500 thousand US citizens died from 2009-2017 from drug overdoses with 90% of the tainted drugs coming from the Southern Border.
- Crypto currencies went down huge last year. Many went defunct.
- While many countries have taken a big hit in their stock markets, India seems to continue to move ahead with a 1.3 billion person population and may still be one of the best long term bets on growth due to demographics.
- With the recent price of oil varying from 76 dollars down to about 50 dollars today, most countries like Russia and Nigeria and states like Texas tend to thrive very well as long as oil remains around 50 dollars per barrel or higher.
- Luminaries such as Jeffrey Gundlach still see a problem with government and corporate debt driven economic growth.
- The government shutdown is a big challenge but most people believe that the debate is a non-issue because an $18 billion border control system is equal to a mere .033% of the annual budget. Or, it is like 3 pennies out of $100.
- The Yellow Vest Movement is a real working class movement that should not be ignored. Working taxpayers in France and now other nations are protesting government’s sloth, corruption and waste by bureaucrats who are targeting the hardest working and families in the suburbs and rural areas with new discriminatory taxes.
- The real effect of the Trump Tax Reform will be felt in April for the first time. The taxpayers will probably have a bit more disposable refund money than last year.
- Many states are predicted to have a boost in state tax revenues due to the elimination of the personal exemptions created by the new tax code while federal taxes may go down for most taxpayers.
- The average American will probably be paying a higher mortgage rate this year than in the last five years. A typical family would probably get a rate at around 5%.
Overall, there are several key indicators showing that 2019 may have markets decreasing in the first and second quarters.Then, the last two quarters of 2019 may have some increases.Along the same lines, the emerging markets may have value and increases by the end of the year.
The recent commentary on stock markets reminds me of the late 90s when the economists at big brokerage houses would announce to clients that they were moving out of the domestic markets and investing in China, Russia, India and Latin American to capture value, but within months, they would announce that they are coming back into the U.S. to buy more blue chip domestic stocks.
George Mentz JD MBA CWM Chartered Wealth Manager ® is a licensed attorney and CEO of GAFM ® global education, which is an ISO 29990 Certified professional development company operating in over 50 nations. Mentz is an award winning author and advisory board member to several companies around the world in education, charities, and crypto currency.
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