LPL Research Outlook 2019: FUNDAMENTAL: How to Focus on What Really Matters in the Markets is filled with investment insights and market guidance for the year ahead. LPL Financial Research believes that even as investors face prospects for periodic bouts of volatility, emphasizing fundamentals will remain critical for making effective investment decisions. LPL Financial Research’s Midyear Outlook 2019 provides updated views of current fundamentals and factors that should persist as shorter-term concerns fade, and emphasizes four primary pillars for fundamental investing – policy, the economy, fixed income, and equities. As headlines change, look to these pillars and LPL Financial Research’s Midyear Outlook 2019 to help provide perspective on what really matters in the markets.
Read more about our forecasts and key themes in the full publication.
As LPL had predicted in the last roundup, international trade remains a huge wildcard when assessing the state of 2019 investments. Trade disputes between the U.S. and China continue to dominate the global economic stage, adding a level of uncertainty to the market that could pose a danger to many investors if not resolved. China and the U.S. will likely strike a compromise in the near future, as this dispute has sent ripples through both economies, but no one can be certain when this will occur, or what form it may take. Despite this, the possibility that we will plunge into another recession appears unlikely. Due to international uncertainty and an aging market, stocks may see some volatility. However, the market pillars appear comparatively stable for the long-term, and focusing on your investment goals and avoiding emotion-driven short-term decisions will steer investors down the right path.
Policy and the Economy
U.S. economic policy seems to be the largest source of volatility and uncertainty as we move through 2019. Business-friendly fiscal policy — namely, the 2017 Tax Cuts and Jobs Act — should help grow the national GDP. However, this is widely counteracted by international uncertainty and a lack of trust in a hostile trade environment. Until the trade disputes between the U.S. and China reach some sort of parity, expect a market dampened by uncertainty. Further, posturing against Mexico, a former trade ally, has sowed further confusion across the international trade environment. This uncertainty pairs with an ever-growing trade deficit, which could have broader impacts than many expect.
Economically, inflation has been growing at a rate that indicates a generally healthy market, and LPL predicts this growth will stay on track with the 2018 numbers. The domestic job market continues to thrive, with above-average hiring rates and productivity growth at its highest since 2010. While the global market has slowed during 2019, the U.S. economy seems well-insulated thus far, particularly overperforming international markets in Europe which have dealt with a variety of struggles. However, key Emerging Markets are worth watching, especially as India outperforms China in economic growth.
Fixed Income and Equity
So far this year, bonds have seen some significant shifts, with prices rocketing and yields plummeting. The main factors responsible for these changes include a consumer inflation rate which is lower than the Fed’s target, a pause in rate hikes for the rest of 2019 (after four consecutive hikes earlier this year) and U.S. Treasury investment gaining popularity as a “safe” alternative. Currently, Emerging Market bond investment is relatively unapproachable, with expensive bonds and low yields, and LPL encourages investors to be extremely selective on this front. Investment-grade bonds and mortgage-backed securities are also attractive options, based on the lower risks involved in MBS and the current economic environment.
Stocks rebounded following the dip at the end of 2018, and LPL predicts that the profits will blow past the established expectations. The Fed’s promise to avoid rate hikes has also helped create a more conducive economic landscape for investors, furthering the possibility of another strong year. Now is the time to invest in EMs over developed markets, aiming at industrial, financial, and technology markets. Trade uncertainty has put a slight damper on stock investment, but several other factors paint a promising picture for prospective investors. With an easing of trade tensions, estimates may rise even higher.
Your Investment Strategy
Keeping on top of the factors that rule our market can be a challenge, especially with the amount of noise that continually surrounds an ever-changing market. So far, 2019 has presented the market with some sizable challenges, including an aging bull economy and a tremendous amount of trade uncertainty. However, as laid out by LPL, several pillars of investing provide valuable guidance for your strategy, helping you grow your assets with time. Deferring to these in 2019 should help maintain steady growth in assets. Reach out to our experienced financial planners to learn more about the services we provide. Our investment plans are customized to fit your situation, helping you achieve your financial goals as quickly and safely as possible. Reach out today!
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. The economic forecasts set forth in the presentation may not develop as predicted. This research material has been prepared by LPL Financial LLC. Tracking #1-866752 (Exp. 12/19)