4 Key Areas Of The Market To Watch In 2019

LPL Financial recently released its Outlook 2019 report, which outlines what the firm thinks investors need to focus on in the coming year. Here’s an overview of LPL’s take on several key areas of the market.

• Policy: LPL said the onus is on federal legislators to help support the economic expansion, but long-term investors should focus more on company fundamentals and corporate profits rather than reacting too much to speculative policy headlines out of Washington.
• Keys to Economic Growth: Despite market jitters, LPL is not anticipating a U.S. recession in 2019. Nevertheless, LPL says investors are wise to be paying attention to some late-stage market cycle indicators, such as rising inflation, wage growth and Fed tightening.
• Bond Market: LPL says the 37-year bull market in bonds may finally have ended, but there are no clear signs that a bear market has begun. LPL says it will be more difficult to make money in bonds in the years ahead due to a number of factors driving interest rates higher. LPL encourages an active bond investing strategy that identifies areas of the bond market that may outperform in an environment of rising rates, a strong dollar and fiscal stimulus.
• Stock Market: The $1-million question for most investors heading into 2019 is whether the S&P 500 will bounce back. The S&P 500 could deliver 8-10-percent returns next year, although volatility will likely remain elevated, according to LPL. The firm recommends investors protect their portfolios by focusing on strong fundamentals and staying diversified.

Takeaways

Extreme volatility in the closing months of 2018 has the SPDR S&P 500 ETF Trust SPY on track to finish the year down 7 percent. Despite concerns over rising interest rates, slowing economic growth and the impact of the ongoing international trade war, LPL is generally optimistic about 2019.

“Despite this aging cycle and the presence of heightened market volatility, we maintain a positive outlook for 2019, thanks to our conviction in the fundamentals supporting continued economic growth and stock market gains,” the firm said.

In general, LPL said investors are best served by staying calm, focusing on market fundamentals and staying positive about the future.

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