market, economy next year
The economy remains in a growth mode, and the long bullish trend for the stock market still appears intact. But for how long?
Angst has overtaken optimism in the financial arena in recent weeks, setting up a cautious backdrop heading into the new year.
The investment story lines for 2019 will be dominated by indicators pointing to a possible recession, which has made some investors jittery, and the end of the long bull market in stocks.
Rising interest rates are one concern, along with trade tensions and slower growth in corporate profits. Plus, there are always wild cards in the mix.
Here are six things to watch in the new year:
One of the brightest aspects to this economic cycle is that the nation's unemployment rate continues to decline, and job growth remains on a healthy pace. This put consumers in a mood to spend, with holiday-season retail sales jumping a solid 5 percent over the same period last year, according to a post-Christmas tally by MasterCard.
"The economy still has its sails full and is moving briskly along with fair tailwinds," wrote Christopher Rupkey, chief financial economist for MUFG Bank. He doesn't see a recession on the horizon.
There are problem spots in the job market, especially difficulties felt by many employers in finding enough workers. But if the labor market remains healthy and most Americans who want jobs can find them, then this bodes very well for the economy.
Falling oil prices could keep inflation at bay and help Americans save money at the pump, added Douglas Porter, chief economist at BMO Capital Markets. That could give a boost to consumer spending in the coming year.
As firm as the economy appears, all sorts of problems could derail it, just as the subprime-debt crisis came out of the woodwork a dozen years ago to help usher in a recession. The next problem could be triggered by all sorts of perils – a housing slowdown, resumption of the wealth-draining stock market slide, the widening rich-poor divide or something else.
JP Morgan Private Bank recently cited two imbalances that could harm the economy. One is the tight labor market and low unemployment rate – a situation that could encourage the Federal Reserve to keep raising interest rates. The second is higher corporate debt levels – a function of years of low interest rates – that could crimp the economy if more companies start to default.
Those trends, or other troubles, could be enough to end the expansion. JP Morgan Private Bank predicts the U.S. economy will slow in the second half of 2019 and slip into a mild recession in 2020