Don’t bail out on the stock market or expect a recession quite yet.
Yes, it will continue to be a rocky ride for investors. And yes, a bear market will eventually come in a couple of years, but neither the stock market nor the economy is likely to blow up in 2019.
That was part of two similar economic and investment outlooks from UBS and Natixis officials in separate press briefings in Manhattan on Wednesday.
Market volatility will continue in 2019 as well as central bank tightening, said officials at both sessions. But there is some equity growth left in this now long-in-the-tooth bull market, which won’t drag down the 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 next year there again could be some tough times for investors.
“The volatility situations that have existed through 2018 are likely to continue throughout 2019,” said David Jilek, chief investment strategist for Gateway Investment Advisers.
What will keep volatility high in 2019? Changes in Federal Reserve bank money creation, fiscal policies continuing to generate huge amounts of red ink and an expected drop in earnings numbers are playing into the high volatility rates, Jilek added. He said that recent high earnings numbers are “probably unsustainable.”
And then there are the central banks.
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 the they were at the start of the year.” They predicted that the Fed will increase interest rates by some 100 basis points over the course of the year.