Does The Bull Survive? Stock Market Outlook 2019

Jan. 11, 2019 5:01 PM ETAKCA, ALNY, AMRN, ARGX, PFE, ARRY-OLD, BCRX, OPCH, CDNA, CRON, DNLI, EXEL, FATE, GFI, GOL, ICPT, INCY, IONS, MRTX, REGN, TNDM, VCEL, VNDA, VRTX, XPER, RARX, CRON:CA17 Comments

Summary

  • Intense volatility in the final quarter eroded double-digit gains last year.
  • Fears of a recession or a sharp economic slowdown in 2019 are inconsistent with data and most likely overblown.
  • With the Federal Reserve in alignment with a wait-and-see approach, it preserves key market support for now.
  • Economy and earnings will step-down, as the tax cut boost fades, but it'll most likely be pre-2018 like and not a fall towards a recession.
  • Stock market will be more selective in 2019, and in a stock picker's market, there will be many opportunities to outperform indexes.

GraycellAdvisors.com ~ 2019 Stock Market Outlook

Market Pulse

The year 2018 will be remembered as the year when downside volatility thundered into the market in striking contrast to 2017 when stock market volatility was so meek that it subsided to a level below that of bonds for the first time.

The final month of 2018 was different. The bear swooped down faster on the stock market than a fly on a honeypot. In fact, the precipitous decline in December right up to Christmas was so sharp and persistent that it was hard to find a recent comparable meltdown. The month of December is usually amongst the seasonally strongest in the year, but in 2018, it turned out to be one of the worst since 1931.

As the major stock indexes slipped in-and-out of a bear market, it is clear that 2019 is presenting unique challenges, which will make it a more selective stock picker's market.

In our 2018 outlook, at the beginning of last year, we had noted:

During 2018, we believe the market will deliver returns in the 10-15% range for the major indexes. We anticipate a strong start to the year and believe the second-half will be more volatile. Financial markets are not easy to interpret and often defy logic...The Bulls will still growl in 2018, but the Bears will be allowed to sneak in a growl or two as well." Stock Market Outlook 2018, Jan 2018

The stock market was on track to deliver a solid double-digit return performance in 2018 until the final quarter began. The double-digit gains melted away rapidly and 2018 closed with all major indexes recording negative returns.

GraycellAdvisors.com ~ Stock Market Performance

Financial markets often defy logic, particularly in times of stress. The dramatic slide in the final months of 2018 was exacerbated by a confluence of events, which spiked uncertainty but were not an immediate

This article was written by

Tarun Chandra, CFA profile picture
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A healthcare growth portfolio with a record of consistently strong returns

I have worked as an Analyst on both the Buy (Asset Management) and Sell (Investment Brokerage) sides, as well as in Strategy and Finance roles for technology services companies. For many years, I have been publishing risk-adjusted, return-driven quantitative model portfolios.


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