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Updated on Friday, November 30, 2018
Investing money in the stock market is one way to build wealth — many view this form of investment as a critical piece of retirement. You may be ready to start your investment portfolio. However, placing your money into the market without a strong understanding of the current conditions can be nerve-wracking.
As with most things, knowledge can help to ease that uncomfortable feeling. The more you know, the more comfortable you will be in your market investments.
Below, we take a look at the past and share expert opinions about stock market predictions for 2019.
2018 market performance at a glance
Understanding the past year will help to better frame the stock market predictions for 2019.
When looking at the stock market forecast over time, we will refer to the Standard & Poor’s (S&P) 500. The S&P 500 is an index of the largest 500 publicly traded companies in the U.S. stock market. Although the investment portfolios of each individual investor will react differently to the changing market, the S&P 500 is a good benchmark to follow market changes.
In 2018, the stock market proved to be very volatile. Although the S&P 500 has shown a small year-to-date increase, the slight rise has been accompanied by a bumpy ride.
The S&P 500 started off the year with a bang when it reached an all-time high in January, but it subsequently dropped 10.16% in February. It continued to rise and fall in significant swings for most of the year. In fact, although the S&P 500 hit multiple record highs this year, October 2018 was the worst month for the past seven years.
Even with all this turbulence, the bull market — when the prices in the stock market are rising — became the longest-running in history on August 22. As we near the end of the year, more investors are convinced that we are heading into a bear market — when the prices in the market are falling.
“This type of volatility mirrors that of which the US economy has seen at the onset of previous bull market wind-downs,” said Paul Shelton Jr., a portfolio manager with Warwick Shore Advisors. In a volatile market, it can be difficult to invest with confidence. However, the outlook for the future is not entirely grim.
The stock market forecast for 2019 and beyond
Although experts have made stock market predictions for 2019, it’s impossible to know what will actually happen. No one can foresee the unexpected events and conditions that will create changes in the market. The only thing we can anticipate are changes of some kind.
Keep in mind that attempting to predict the future can be the downfall of many investors. It’s tempting to try timing the market, but that can often be a risky investment strategy. Instead, use the stock market forecasts below as a jumping off point as you conduct your own research and decide which investments are best for your portfolio.
It’s not surprising that different experts have different opinions about the market’s outlook. Even predictions about the next year vary greatly.
According to a CNN report, Morgan Stanley equity strategist Michael Wilson predicts that we are currently entering a bear market, indicating a downturn in the market. However, other investment giants like Goldman Sachs disagree. Their official outlook predicts that the S&P 500 will continue to grow slowly with more choppiness in 2019, as reported by CNBC. Similarly to Goldman Sachs, Shelton said, “Over the next year I foresee moderate appreciation — however, the ride will be bumpy.”
An Eaton Vance survey of more than 600 financial advisors showed similar division: 54% foresee stocks to continue increasing in value, but many are concerned with the market’s volatility. More than a quarter of surveyed advisors think geopolitical issues and U.S. politics are drivers in market volatility, with another 22% pointing to the Federal Reserve’s decision to raise interest rates as a contributing factor as well.
Other factors that could sway market predictions for 2019 include rising wage costs, slowing U.S. GDP growth and a falling growth rate of the S&P 500. It’s unclear how significantly these factors will affect the growth of the market in 2019, but many investors agree these developments will slow growth to some extent.
Making accurate stock market predictions for the next year is difficult, but creating a forecast for the long-term is even harder — so many factors can change between now and then.
With the average historical returns of the market around 10%, it’s tempting to assume returns will remain high. However, Kenneth Melotte III, founder of Melotte Financial Advisors, warned against that. “I caution anyone against assuming U.S. stocks will provide returns remotely close to the 10% long-term historical average return over the next ten years.”
The strong cautionary words were founded in Melotte’s belief that “the potential downside in the next bear market is quite large, as losses may exceed 50% or even 60% from the ultimate peak based on the current level of the most reliable valuation metrics.”
Yet Melotte was quick to note that market forecasts really are “a guess … no matter who is making the prediction.” Past performance has shown that long-term investments are typically less risky than short-term investments, but it’s important to carefully assess one’s risk tolerance before deciding to invest.
Remember, predicting the future is impossible. The only sure thing is that the market will change — whether it rises or falls has yet to be seen.
One way to help protect yourself from the inherent volatility of the stock market is to diversify your investments and continue to invest on a regular basis. If you’re nervous about investing or aren’t sure where to start, consider consulting with a licensed financial professional to get specific advice for your money.