2<\/sup><\/strong><\/a><\/p>\n—————————————————————–<\/p>\n
Perhaps this optimism should have been a clearer indicator of the difficult road stocks faced in 2018. In my view, here\u2019s how it works: Investors become overly optimistic about prospects for the global economy, then they become complacent and pile on risk, then they apply selling pressure when the economic data and news is not as positive as everyone hoped. In 2018, the not-so-positive news seemingly came in droves. The trade war, Fed tightening, political uncertainty, the government shutdown, and weaker earnings outlooks set the stage for disappointment and made it difficult for stocks to do well.<\/p>\n
The upshot for 2019, however, is that the pendulum appears to have swung back in the other direction, with the mood in the global economy notably more negative\/pessimistic today.<\/p>\n
Market declines tend to affect sentiment, but I sense that there is also growing concern that the next recession is closer than many expect. In other words, investors see that the global economy is in sync again, but this time it\u2019s slowing <\/em>in unison \u2013 not the other way around. The U.S. is coming off a ~3% GDP growth year in 2018, and 2019 looks poised to deliver at least a full percentage point lower in growth. The global economy bears a similar story \u2013 China expecting notably slower growth, and the U.K. and the European plagued by Brexit and the rise of populist politics. World trade volumes, coming off 5.4% growth in 2017 and 3.8% growth in 2018, are expected to grow at less than 3.6% in 2019.3<\/sup><\/p>\nThe current makeup of the global economy simply does not possess the same or even similar exuberance-warranting characteristics, and in my view, that\u2019s a good thing. If the global economic outlook in 2019 is uninspiring and has investors increasingly \u2018worried\u2019 about the outcome, then to me that just means there\u2019s a greater potential for a positive surprise. And stocks like positive surprises.<\/p>\n
In my view, for the year ahead, these positive surprises can come in three forms:<\/p>\n
\n- A Federal Reserve interest rate \u201cpause\u201d mid-year or sooner;<\/li>\n
- A formidable deal with China over trade and structural economic issues regarding subsidies, patents, technology transfers, and openness to foreign investors; and,<\/li>\n
- A lifting of political uncertainty with the completion and delivery of the Mueller report.<\/li>\n<\/ul>\n
These are three pretty big \u201cifs,\u201d but I tend to be in the camp of believing resolution is within closer reach than conflict.<\/p>\n
Bottom Line for Investors <\/strong><\/p>\nSentiment has shifted fairly strongly to the negative, and investors seem increasingly inclined to hedge and shift to defensive positions even as the U.S. and global economy continue to grow. Yet the unemployment rate in the U.S. remains near 50-year lows with wages rising, and corporate earnings are still set to grow in the high single digits for 2019. It\u2019s as though investors are posturing for a recession that does not actually fundamentally appear imminent.<\/p>\n
Warren Buffet once said that it\u2019s wise to be \u201cfearful when others are greedy and greedy when others are fearful.\u201d4<\/sup> If investment sentiment is to be measured today, I would venture to say that investors are far more fearful than they are greedy or optimistic about the outlook for the economy and stocks. Assuming we get growth and positive results with a backdrop of pessimism, I think that could mean a good outcome for stocks.<\/p>\nIn the meantime, instead of falling prey to fearful investor sentiment, I suggest you keep an eye on the fundamentals. To help you do just that, I am offering all readers our Just-Released Stock Market Outlook Report.<\/strong><\/a><\/p>\nThis Special Report is packed with newly revised predictions to consider for 2019 that can help you base your next investment move on hard data. For example, you’ll discover Zacks\u2019 view on:<\/p>\n
\n- Should you stay bullish?<\/em><\/li>\n
- What sectors show the best opportunity?<\/em><\/li>\n
- What industries within those sectors most merit your attention?<\/em><\/li>\n
- What produces U.S. optimism in the coming year? <\/em><\/li>\n
- Year-end forecast for the S&P<\/em><\/li>\n
- Small-cap vs. large-cap returns<\/em><\/li>\n
- And much more.<\/em><\/li>\n<\/ul>\n
If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!5<\/sup><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"Investor sentiment has made a notable shift over the last two years or so, and the pendulum swing may actually […]<\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-7914","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7914","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=7914"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7914\/revisions"}],"predecessor-version":[{"id":10788,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/7914\/revisions\/10788"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=7914"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=7914"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=7914"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}