Stock Market Risks to Watch in 2019

January 2, 2019
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Although 2018 was one of the worst performing years when considering index losses, there was some positive movement in post-Christmas trading. The year-end rally suggested that there can still be strength in the market risks when investors see signals that inspire confidence.

2019 is here and many analysts are hopeful that the stock market will continue with its current momentum. However, there are still some factors that could cause drama in the coming months.

Here are three risks that every investor should be aware of this year.

Worldwide Economic Slowdown May Impact the United States

Economic expansion continues in the United States and around the world, however, growth is slowing.

The United States Federal Reserve has forecast 2.3% GDP growth for 2019. This is around half of the 4.2% peak in the second quarter of 2018. The Chinese economy is slowing too, and this will have an impact throughout Asia.

The United States Dollar is growing in strength, and this makes American products less competitive in overseas markets. Federal rates could also hinder economic growth if they continue to rise despite a lack of inflation.

A slowing economy won’t kill the stock market risks, but it could reduce overall confidence.

Earnings Growth Will Slow

Wall Street analysts expect that U.S. companies will grow earnings by up to 10% across the board this year. Profits last year increased by 23%, so the difference will be significant.

Tax breaks helped corporations in 2018, as did high consumer confidence.

Investors will still be happy that corporations are growing, although it’s less likely that we will see as many headline-grabbing earnings reports that inspire widespread confidence.

Political Uncertainty Looms

The government is currently locked in a shutdown that could rattle investors if it continues much longer. There is hope that the new Congress will pass a spending bill on January 3 to end the shutdown, but nothing is guaranteed at this point. A strong division remains, with Democrats unwilling to fund President Trump’s border wall.

Overseas politics will also play a part. The United Kingdom will withdraw from the European Union this year, and if it is poorly managed it could lead to a recession in their market. London remains the largest world financial center and an economic down turn there could have a global knock-on effect.

Optimism and Market Risks Caution Advised

The end of 2018 showed that there are still bullish investors in this market biggest risks. However, caution is advised as always. Portfolio diversification, evidence-based stock picks, and reading of all potential economic signals will ensure smart trading in 2019.

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