Market experts: Don’t bail on stocks in 2019

By: Gregory B.

Don’t bail out on the stock market just because your stomach can’t take it, market pros suggested last week.

Yes, it will continue to be a rocky ride for investors. And yes, a bear market will eventually come (if not for a couple of years).

But neither the stock market nor the economy is likely to blow up in 2019.

That was part of the economic and investment outlooks from UBS and Natixis officials in separate press briefings in Manhattan after the Dow Jones dropped 800 points on Tuesday.

Market volatility will continue in 2019 as well as further tightening of rates by the Federal Reserve, said officials at both sessions. But there is some equity growth left in this now long-in-the-tooth bull market and robust economy, they said.

“We don’t currently see the conditions commonly associated with an impending recession, and there are still opportunities for pockets of value,” UBS officials wrote in “Turning Points. Year Ahead 2019.” A recession, they said, is still 12 to 18 months away.

However, both Natixis and UBS officials warned that there again could be some tough times for investors next year.

“The volatility situations that have existed through 2018 are likely to continue throughout 2019,” said David Jilek, chief investment strategist for Gateway Investment Advisers.

Rate rises by the Fed and an expected drop in company earnings are playing into the high volatility rates, Jilek added. He said that recent high corporate earnings numbers are “probably unsustainable.”

UBS officials noted that 2019 will be the “first time since the global financial crisis when central bank balance sheets are on track to end the year smaller than they were at the start of the year.”

They predicted that the Fed will increase interest rates by about 100 basis points over the course of the year, meaning four rate rises are likely. (A basis point is one-hundredth of 1 percent.)

However, both UBS and Natixis officials hedged their 2019 predictions by warning that everything could be ruined if the trade war continues between China and the United States. Still, they said that it is unlikely.

President Trump and Chinese President Xi Jinping would let the disasters of a tariff war continue.

While tariffs talks are ongoing between the two nations, UBS officials predicted moderate growth numbers in the United States next year.

They also predicted a bear market in 2020. UBS officials expect that when the bear market does come, it will be an average one of about a 20 to 25 percent decline.

UBS officials also said that, in the best-case scenario, stocks could rise 10 percent to 15 percent in 2019; in the worst case, they could fall about 10 percent.

Still, they argued that hanging around to the end of a bull market is an effective strategy.