Our friends at LPL Financial have recently released a collection of informative material that contains insightful commentary as well as economic and market guidance for 2019. Click HERE to read the publication and below we will highlight some of the more relevant topics discussed within.
• Policy Basics: The first pertinent section of the Outlook 2019 spread contains some recap related to the Federal Reserve, fiscal policy, global banking trends and world trade volumes.
• What to expect from Congress: The second major point chapter one is focused on is the possibility of important policy implications due to a split congress. A Congressional divide between Democratic control of the House of Representative and a Republican majority in the Senate has LPL highlighting that, "Historically, a Republican President with a split Congress is a positive for economy and stocks."
• Growth and Business: LPL lays out a few economic forecasts pertaining to the 2018 fiscal stimulus as well as real GDP vs inflation and unemployment. Spoiler - the numbers are surprisingly good!
• Talks of Recession: LPL's stance is that "We do not anticipate a recession in 2019, thanks to a the fundamentally driven economic momentum, combined with fiscal incentives and government spending programs on tap for the coming year."
• Snapshot of Market History: Pay close attention to the detail packed charts LPL has provided regarding the S&P 500 averages going back to 1950. You'll start to see some strong, positive macro trends playing out on a regular basis, such as length and strength of bear markets and recession timing.
• Bonds and the Yield Curve: By now you have heard the term 'Yield Curve' repeated incessantly over the last few months (and for good reason). Outlook 2019 dives into the implications of this treasury trend and what is could potentially mean for investors, especially in the short-term.
• How to Invest: Every investor has different goals and different time horizons within which to work towards achieving those goals, LPL lays out a rather broad approach to investing tactics based on interest rates expected to continue increasing slowly during 2019.
• Bull Markets: While many advisors and chartists disagree on exactly when this most recent bull market started, they do all agree that if it continues until May 2019, without an official 20% all-around market pullback, "it'll be the longest expansion ever". We've been riding out some very positive markets for quite a long time at this point, it makes sense to look into adjusting some of the more aggressive portfolios to more conservative positions in order to lock in most of that growth. For many of our Strategic Asset Management accounts, we have already made this move and have avoided much of the recent volatility.
• Overall Outlook: LPL expects 2019 to be "...a good year for stocks, with the potential for 8-10% returns for the S&P 500." If you have already chosen to be involved in a competing portfolio to the S&P benchmark, you're well on your way to the same possibility of returns. Keep in mind, tracking the S&P 500 is only one of many typical approaches to broad market indices, feel free to discuss alternative approaches with your Financial Advisor.
In conclusion, LPL put together some fantastic material in their Outlook 2019 publication, but it will take you more than 5 minutes to really dig into all the content they have provided. Set aside some time to grab yourself a coffee and a quiet place, and most importantly take your time to soak in the over-arcing themes of each chapter. We would love to discuss your thoughts about the 2019 outlook during your next meeting.