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Note: Unless otherwise specified, currency amounts described in this article are in U.S. dollars, and government references are to the U.S. government.

2019 Market Outlook: Be Prepared

Last year, our Market Outlook theme was “it’s getting late,” which accurately forecast what happened in 2018: an expansion of the late-stage business cycle and an increasingly bumpy ride for stock markets. We’ve already seen declining growth rates in 2018, and heading into 2019 there are signs that an economic peak and potential recession may be coming. Rising interest rates, declining liquidity and sluggish global growth—with trade conflicts as an additional headwind—may weigh on economic growth and market performance in 2019. Investors should be prepared for increasing market volatility, and possibly even a bear market, in the coming year.

Each section in this 2019 Schwab Market Outlook—U.S. Stocks and Economy, Global Stocks and Economy, and Fixed Income—will discuss ways to prepare for potentially changing conditions. Having a financial plan and an appropriately diversified portfolio are two key first steps for weathering any market environment. Note that this is just a one-year outlook, and investors should keep their investing time horizon in mind before reacting to any forecasts.

Key points:

  • We expect U.S. economic growth to slow in 2019, with the risk of a recession rising.
  • Earnings growth likely will slow, as year-over-year comparisons with strong 2018 earnings become more challenging.
  • Trade tensions remain a risk, but inflation and interest rates are the key indicators to watch.
  • The Federal Reserve likely will continue to raise short-term interest rates, but at a slower pace than in the past, and may pause or end rate hikes by mid-2019.
  • Ten-year Treasury yields likely already have peaked at the 3.25% level.

Next Steps

Important Disclosures

Past performance is no guarantee of future results. Forecasts contained herein are for illustrative purposes, may be based upon proprietary research and are developed through analysis of historical public data.

The information here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of securities and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction for his or her own particular situation.

Investing involves risk including loss of principal.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or geopolitical conditions.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

Diversification does not ensure a profit and or protect against losses in declining markets. The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.