Market Outlook for 2019: Uncertainty is Certain


Rocky Speight



Monday, February 4, 2019

To say the financial markets were a bit bumpy in 2018 may be an understatement.

The S&P 500 was down 6.2 percent, the first time this index fell since 2008. So what can you anticipate in 2019?

Let’s review the causes for last year’s market volatility. Uncertainty was a major culprit. Uncertainty about tariffs, the trade dispute with China, uncertainty about Brexit — they all combined to make the markets nervous. The Federal Reserve raised interest rates four times, and even though rates remain low by historical standards, the increases caused some concern.

And now that we’re into 2019, these same uncertainties remain. Although the Fed has indicated it may be more cautious with regard to new rate hikes, there are indications of slower growth ahead. And after strong 2018 earnings growth, corporate earnings may grow more slowly. Earnings are a key driver of stock prices.

Nonetheless, the U.S. economy is showing enough strength that a recession does not appear to be on the horizon, which is also likely to be the case globally. Ultimately, the projected continued growth of the U.S. economy and the possible resolution of some uncertainties could help markets rebound.

As investors, we cannot control the everyday ups and downs in the markets, but we can control our decisions. Consider these actions for 2019:

■ Be prepared for volatility. As mentioned, many of the same factors that led to the market upheavals of 2018 are still with us, so don’t be surprised to see continued volatility. The more you’re prepared for market turbulence, the less startled you’ll be when it arrives.

■ Stay diversified. At any given time, different financial assets may move in different directions. To help dilute risk and take advantage of different opportunities, you should maintain a broadly diversified portfolio containing stocks, international stocks, bonds, government securities and so on. You may need to rebalance your portfolio to maintain an appropriate proportion of each asset class, based on your risk tolerance and long-term goals. Keep in mind, though, diversification can’t guarantee profits or protect against all losses.

■ Take a long-term perspective. It can be disconcerting to see several-hundred point drops in the stock market. But you can look past short-term events, especially if your most important financial target is still years or decades away. By keeping your focus on the long term, you can make investment decisions based on your objectives — not your emotions.

If 2019 continues to be volatile, you'll need to stay prepared and make the right moves — so you can be confident that you did everything you could to keep moving toward your financial goals.

Rocky Speight is a financial adviser for Edward Jones in Rocky Mount.