Stock Market Predictions For 2019: What to Expect in the New Year

The American stock market is not in good shape going into 2019. In December, all 3 major stock indexes were negative for the year.

Specifically, in December, the 3 indexes dropped almost 8 percent in the month. There are a number of factors weighing on the stock market.

At the same time, there are positive economic indicators that should not be ignored. Read on for a 2019 stock market forecast. Explore both positive and negative economic news that will help you make the right stock market predictions in the new year.

Why Are Stocks Falling?

For the majority of the last two years, the stock market has been flying high. The stock market growth only accelerated after Congress passed corporate tax cuts.

The Tax Cuts and Jobs Act improved earnings and spurred new business investment. In addition, the business-friendly Trump administration reduced costly regulations on American companies.

However, the stock market grew too fast and was due for a major correction. There are also a number of negative factors now weighing on the economy.

Tariff Policy

While the Trump administration cut taxes and regulations, it also imposed tariffs on American imports. Trump’s trade war was intended to make global trade fairer.

However, it has not yielded the desired result and American companies are now suffering. The U.S. Treasury Department recently revealed that tariffs are costing American companies $6 billion per month. Obviously, this is a major drag on the economy.  

Tax Policy

The immediate positive effect of the corporate tax cuts is wearing off. Investors have priced the improved earnings into share prices.

Also, the positive impact of tax cuts on consumers lessens each year. In addition to inflationary headwinds, tax cuts on individual income are gradually phased out in the mid-2020s.

Federal Reserve

The Federal Reserve is serving as another headwind for the stock market. To combat the Great Recession in 2008, the Fed took the extraordinary step of reducing interest rates to nearly zero. The intent was to make borrowing cheaper and insert new capital into the economy.

Now that the economy is on solid footing again, the Fed is reversing course. Rising interest rates are creating downward pressure on the economy. This is especially true in the housing market where higher interest rates are turning off prospective buyers.

Is There Any Good News?

The economic news is not all bad. In fact, there are many economic indicators that suggest this is only a temporary correction.

For example, the American job market remains in excellent condition. The unemployment rate currently sits at a superb 3.7 percent.

There are also signs that Trump’s trade war is coming to an end. A new trade agreement was recently signed with Mexico and Canada.

Also, China has lowered tariffs on vehicles to help promote a new trade agreement with America. The U.S. achieved Gross Domestic Product (GDP) of 4.2 percent over the past year, which is very strong.

Stock Market Predictions Recap

America’s 3 major indexes are in the red for 2018 and there is plenty of reason for caution. At the same time, the economy at large is still performing well.

This suggests the stock market downturn is only temporary and investment opportunities remain available. If you are interested in capitalizing off of stock market predictions in 2019, please contact us for assistance.