Prediction 2: Unemployment bottoms in 2019 while wage growth continues to rise.​

Unemployment has fallen to 3.6% and continues to hover around that level.2 We think unemployment is likely to bottom this year. While wage growth has been increasing at a slower pace than we expected this year, it is trending higher.

 

Prediction 3: The Treasury yield curve flattens and credit spreads widen due to late cycle concerns.​

The yield curve inverted several times in 2019 and credit spreads tightened at the start of the year before widening over the last couple of months. For the year, the spread between the 2- and 10-year segments of the Treasury yield curve widened from 19 to 25 basis points.3 And the spread between the 10-year Treasury and AAA-rated bonds has tightened by 42 basis points.3 We think fixed income market volatility will persist, making the outcome of this prediction highly uncertain.

 

Prediction 4: Corporate earnings growth estimates weaken for 2019 and 2020 as both revenue and profit pressures rise.

Both revenues and profits have come under pressure this year, and as a result, earnings growth expectations for 2019 and 2020 have fallen close to 6% compared to where they were at the start of the year.3 At this point, we think 2019 estimates have come down to reasonable levels, but we think 2020 expectations still appear too high and may fall more.

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