Stock Market 2019 Look Ahead
2019 is here, and it’s time for Finance Gourmet to take a look forward at what is going to happen with the market in 2019, the economy in 2019, and how you and your personal finances should be setup to weather the storm, and take advantage of the opportunities.
2019 Economy
Let’s start with an easy one (Hah!). The 2019 economy looks to be a transition year. This is either the year, that the the economy and the markets consolidate their success and move forward into another expansionary period, or the year that the recession starts. Under normal circumstances we might have a pretty good idea of where things were heading, but these are not normal circumstances. The Trump Presidency alone adds a measure of volatility and uncertainty that just can’t be predicted.
That being said, we do have several things to look at to help get an idea of where the economy is heading in 2019.
First up is the Federal Reserve, which, at long last, appears to have finally noticed that the economy is slowing and shaking, and that inflation is nowhere to be found other than the always volatile fuel prices. That means that they may finally stop their incessant march toward higher rates, at least long enough for the economy to digest them before yanking them higher again.
As of the latest meeting notes, the Fed expects to raise rates twice in 2019. That number isn’t the important thing, the important thing is that they are finally pausing on the race up, which means we’ll get clean data to see if this economy is strong enough to absorb the already executed increases before we blindly fire off another round.
Analysts now expect a several month pause in increases here in the beginning of 2019, and that is huge news. That pause might just be the difference between a recession, and a nice consolidation.
If we get just two hikes in 2019, around May and then toward the end of the year, then things are probably sunny moving forward. But, if the Fed front-loads those two rate hikes into the beginning of the year, then it might just be too much. Expect housing to stall (it already is) and then head down, taking builders, suppliers, and a whole bunch of jobs with. By then, it’s probably too late and the economy as a whole and the markets in general will go through a recession.
The Markets in 2019
My near constant refrain these days is to remind people that the stock market is not the economy. The vast majority of American’s only own stocks inside of retirement accounts they can’t withdraw from. So, while the markets are a huge force in the economy, and an important source of data, the average price of the Dow neither makes, nor breaks, a month for the average family.
So, what to expect for 2019?
Volatility.
Professional traders, and more specifically, computer programs, are all looking to catch the market, whether or up or down. That means that they are set to trade, and trade widely on almost any move. With a market already topping out P/E wise, and a President who initiates and abandons economic moves based on a Fox News segment, there is bound to be plenty of natural volatility that will only be amplified by computerized trading convinced that every move is THE MOVE and trading to get ahead of it.
Buckle up, rebalance your portfolio, and stop watching your market balance. You probably won’t like it anyway.
Personal Finance in 2019
This should be its own article (and it will be) but for now, here is what you should be doing for your personal finances in 2019.
First, batten down the hatches. It might get ugly out there, and it might not. The proper way to prepare is to be ready for the ugly, and throw a party with the extras you didn’t need if the ugly never comes. – That means it’s time to get serious about that emergency fund. If you don’t have one, start one, and get money into it, NOW.
If you do have an emergency fund, it’s time to pad it out to a full six months of expenses. You might need it.
Second, get your housing in order. Housing is the big uncertainty moving forward. If you are going to need to sell, and you don’t have much of an equity cushion, start thinking about sooner, rather than later. If the market falls, it will fall hard and prices will take a hit.
If you are staying, then stay pat. Don’t extend yourself into an equity loan, or cash out refinance. Think defensive, not remodel.
Third, get your job in order. If you’ve been thinking of getting a new job, whether for happiness, or for relocation, start on that TODAY. The job markets are as tight as they have been for a very long time, and employers are having a hard time finding qualified candidates. Now is the time to apply for that job that is a bit of a stretch, or to get hired in another city or better part of town. If the economy rolls, it will roll fast and you’ll have to stay where you are and hope not to get laid off.
Basically, don’t panic. Check all the usual stuff, bank accounts, rebalance your portfolio, get your savings in order, and dump some extra cash into your retirement plans if you can while things are good.
Again, the ugly times may never come, and if they don’t that’s nothing but good news. You can always raid that six month emergency fund for a trip to Pompeii when things solidify