Will The Stock Market Crash in 2019?
Will The Stock Market Crash in 2019?
December is filled with potential threats to the stock exchange. and this could countinue through the start of 2019. It is chaotic on most of the world’s stock markets as I writte this article, with high decline in both the US, Asia and Europe. The Swedish stock market exchange has backed by around 2% in early December.
The US stock exchange:
Was closed on Wednesday because of George HW Bush funeral. When it was open it fell 3.2 percent on Tuesday. There are rumours and speculative discussion if this has to do with the nervousness of the stock market.
President Donald Trump and Chinese president Xi Jinping agreed on a 90 day peace in the trade war this had a short, positive effect on risk will of world investors. The days after the presidents shook hands to agree of ceasefire, confusion evoke about how the different countries interpreted the deal. Was it a win or a lose? The Trump administration also had difficulties explaining the meaning of the agreement at home and the Chinese front leadership was unclear with what they had actually promised. You could feel it was very nervous deal. Will it hold? Will Trump push the thin line and ask for more from the Chinese?
Afterwards both China and USA are telling us that the agreement was a great success and the Chinese have promised fast action to meet the US demands. One of the demand is increased imports. But scary and unexpected thing happend when the Canadian authorities took Huawei’s CEO and they may give her to the USA for lawsuit. This can complicate the relation between USA and China.
There is also an underlying concern about the global economic development. The risk of a significantly weaker 2019 than previously suggested in the forecasts has begun to be taken more seriously in the investors world. However, it should not come as a surprise that growth will be a little weaker in 2019 than the previous year, as a lot of global economic indicators are pointing at that direction. How much weaker it will be has so far been written only in the stars. JP Morgan’s global purchasing manager index actually took a small shot up in the recent November survey. This means that it stil lies with a certain margin above the 50% line, that marks the dividing line between growth and decline.
In addition to the november survey, the labor market, which is a late cyclical phase, continues to be strong in most regions when companies continue to recruit. In the United States, the labor market is strongly in demand for specialist and other educated people. Companies find it difficult to find staff with the right skills.
The interest rate:
We have indication for a recession, the US interest rate curve is about to invert, which means long term market rates will be lower than the short ones. Historically, it has been a fairly accurate indicator of a coming recession. Recently we saw it in connection with the financial crisis 2007 – 2008.
Interest rate market cool down when rumors have it that the Federal Reserve will not increase the rates, this should also be a little positive for the stock market.
In Sweden rates would be increased in december it was postponed. Then there was rumours Swedish central bank would increase rates in january, but still nothing is for sure. Now investor dont think this increase will come any close in the near future.
An additional risk factor for the stock exchange market is the outcome of the forthcoming vote of the Brexit agreement in the British Parliament. Prime Minister Theresa May has encountered new problems in recent days when she was accused of hidding parts of the agreement from an investigation. A bad Brexit for both UK and Europe will increase volatility in the financial market, primarily in Europe.
Conclusion: The cautious investor may be right to stay away from the stock market until the picture is more clear in the begining of 2019. Knowing a little how things develop in the start of 2019 (rates, politics, conflicts ) can give us a little indication of how stable or turbulent the market will be in the new year of 2019
I myself think there will be an correction. But that is not bad. We dividend investors, will just have it more cheaper to buy in the long run. But you who are older, maybe should be a little more cautious and not be so heavy invested in only stocks. You should do you research there will always be stocks that are undervalued.
I have written an article about cars stocks. Here is the article: European Car Stocks.
If you have read the article you will see that I had right in my conclusion about car stocks. I hope all these factors with Brexit and Tariffs are going end well and we can have a nice 2019 ahead of us.
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Source: Avanza, Nordnet, Swedbank, stock friends,