This article was published in the New Haven Register on February 2, 2019.
While stock prices fell in 2018, the fundamentals of the U.S. economy remained healthy. Many analysts expect stock prices to remain fairly steady this year while the nation’s economy slows.
Last year, the S&P 500 stock index fell 6.2 percent, the Dow lost 5.6 percent and the Nasdaq dropped 3.9 percent. It was the worst overall market performance since 2008.
However, it’s important to keep percentage changes in perspective: The prior year, 2017, saw record high after record high as the S&P 500 jumped 19 percent, the Dow soared 25 percent and the Nasdaq increased 28 percent. So, while some investors may have lost some value in 2018, many of them had started the year well ahead.
U.S. GDP growth hit a healthy 3 percent in 2018. Unemployment fell to 3.7 percent by year’s end, and inflation is estimated to have settled at 1.9 percent.
According to the U.S. Federal Reserve Board, GDP growth should slow to 2.3 percent in 2019, partly due to the trade war with China, although in December Fed Chairman Jerome H. Powell said the economy remains “healthy” and “solid.” He said he does not expect a recession in 2019. That being said, the Fed and other forecasters of substance don’t always get it right.
The Fed also forecast that unemployment will fall to 3.5 percent this year and that inflation will remain at 1.9 percent.
The manufacturing index of the Institute for Supply Management stood at 54.1 percent at the end of December, a 5.2 percent drop from the month before. It marked the 28th consecutive month the index has finished the month above 50, which indicates expansion in the manufacturing sector. The organization forecast “continued expanding business strength, but at much lower levels.”
In January, The Conference Board predicted that U.S. growth will slow to 2.2 percent by the second half of 2019, from 2.9 percent at the end of 2018. “Businesses should prepare for a more challenging profits environment but should also recognize that this slowdown does not imply that a recession is on the horizon,” the organization reported. “The economy is still likely to enjoy above-trend growth, with strength coming from consumer spending and labor markets.”
Finally, here is a roundup of recent 2019 forecasts regarding the global economy:
- The Conference Board. Noting a high level of uncertainty on the world stage, the board predicts economic growth to slow to 3.1 percent, from 3.2 percent in 2018. “The global economy has plateaued but shows no signs of falling off a cliff in 2019. Assuming no major disruptions, a gradual slowdown seems most likely,” the board wrote.
- The International Monetary Fund. Global expansion is weakening at a faster rate than expected, the IMF reported. Still, the IMF made modest downward revisions in its forecast, with advanced economies expected to grow 2 percent (down from 2.3 percent in 2018), and emerging/developing economies growing 4.5 percent (down from 4.7 percent).
- The World Bank. Overall global economic growth is projected to soften from a revised 3 percent in 2018 to 2.9 percent in 2019, with advanced economies at 2 percent and emerging/developing economies at 4.2 percent.
All of the forecasting agencies and organizations noted above do not take into consideration you and your money! If you have entered 2019 with some trepidation, you should have your portfolios reviewed by a professional. This is especially true for those that are close to retirement or feeling uneasy. Thanks for your continued readership! (Indices mentioned are unmanaged and cannot be invested into directly.)
Eric Tashlein is a Certified Financial Planner professional and founding Principal of Connecticut Capital Management Group LLC, 2 Schooner Lane, Suite 1-12, in Milford. He can be reached at (203) 877-1520 or through www.connecticutcapital.com. This is for informational purposes only and should not be construed as personalized investment advice or legal/tax advice. Please consult your advisor/attorney/tax advisor. Registered Representative, Securities offered through Cambridge Investment Research Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors Inc., A Registered Investment Advisor. Cambridge Investment Research Inc., and Connecticut Capital Management Group LLC are not affiliated.