Stock Market – Forecast – 2018/2020

Here are some of the investment predictions for next year:

  • The S&P 500 will rise just 5 percent to 3,000 by year-end 2019 (after closing 2018 at 2,850).
  • Households, mutual funds and pension funds should raise cash: “Cash will represent a competitive asset class to stocks for the first time in many years.”
  • Investors should buy defensive sectors and stocks to ride out a tough year where fears of a recession increase. Goldman raised utilities sector to “overweight” in the report.
  • Base forecast: Stocks return 7 percent, T-bills return 3 percent and Treasurys return 1 percent in 2019.
  • But the market could be in for big trouble from tariffs: “If the full 25 percent tariffs are levied on all imports from China the earnings impact could be significant, potentially eliminating any profit growth next year,” the report said.

The bull market will continue in 2019, but it could get choppier as the year continues and investors begin to worry about a recession in 2020. The bank puts a 30 percent probability on a market “downside scenario” where fears of a recession and tariffs drive the market earnings valuation to contract and the S&P 500 to end the year down at 2,500. (It gives a 50 percent probability to its S&P 500 3,000 base case and just a 20 percent probability for the 3,400 upside case.)

“For equity investors, risk is high and the margin of safety is low because stock valuations are elevated compared with history,” chief equity strategist David Kostin and team wrote in a note to clients Monday. “We forecast the S&P 500 index will generate a modest single-digit absolute return in 2019. Perhaps more important, the prospective risk-adjusted return to equities will be less than one-half the long-term average and cash will represent a competitive asset class to stocks for the first time in many years.”

Our economic team has predicted that economic growth will slow to a crawl in the second half of next year.

The S&P 500 closed Monday at 2,690.73, little changed for 2018 and down 8.5 percent from its record reached earlier in the year. The market slid again Tuesday as investors continued to dump their technology stock winners. An earnings miss from retailer Target also added to the negative sentiment.

Too much in stock market

Most investors (households, mutual funds, pension funds and foreign entities) are too overweight stocks and need to raise cash, Goldman said.

“These entities have equity allocations ranking in the 89th percentile vs. the past 30 years,” the report said. “At the same time, these investors have cash allocations at the very bottom of their historical allocations, often ranking below the 1st percentile.”

Buy utilities

We still likes technology stocks despite the rout that started in October. We also likes communication services, saying both sectors have high profit margins that could be sustainable in a tougher economic environment.

We like the sector’s “track record of notable outperformance during decelerating GDP growth environments and a low historical beta to S&P 500.”

Quality stocks

We also advised clients to buy stocks with stable businesses and recurring revenue. Members of the firm’s “high quality” stock basket include Dollar Tree, PepsiCo and BlackRock.

Major PriceDayQ1/19Q2/19Q3/19Q4/19
Dow Jones 23,427 743.12 3.28% 22,667 22,327 21,993 21,662
S&P 500 2,532 84.16 3.44% 2,438 2,401 2,365 2,330
NASDAQ 100 6,420 273.34 4.45% 6,112 6,021 5,930 5,841
NASDAQ 6,726 262.28 4.06% 6,494 6,397 6,301 6,206
S&P MidCap 400 1,683 51.83 3.18% 1,615 1,591 1,567 1,544
US 600 862 29.51 3.54% 828 815 803 791
Russell 2000 1,380 49.66 3.73% 1,328 1,308 1,289 1,269
S&P VIX 21.39 4.06 -4.07% 27.21 26.80 26.40 26.00
US 100 9,599 228.32 2.44% 9,326 9,186 9,048 8,912
NIKKEI 225 19,517 485.75 -2.43% 19,699 19,386 19,080 18,780
FTSE 100 6,833 145.72 2.18% 6,622 6,551 6,482 6,414
FTSE All 3,734 76.03 2.08% 3,621 3,583 3,545 3,508
DAX 10,806 392.22 3.77% 10,400 10,265 10,131 9,999
CAC 40 4,744 133.18 2.89% 4,616 4,562 4,510 4,458
FTSE MIB 18,832 613.39 3.37% 17,883 17,610 17,343 17,080
IBEX 35 8,752 230.43 2.70% 8,357 8,262 8,168 8,075
ASX 200 5,610 24.91 0.45% 5,506 5,454 5,403 5,352
ASX 50 5,558 36.40 0.66% 5,520 5,468 5,417 5,366
Australian All 5,677 29.50 0.52% 5,572 5,520 5,468 5,417
SHANGHAI 2,515 50.51 2.05% 2,425 2,385 2,346 2,307
CSI 300 3,036 71.03 2.40% 2,961 2,913 2,865 2,818
SHANGHAI 50 2,315 45.40 2.00% 2,226 2,189 2,153 2,118
SENSEX 35,631 116.94 0.33% 35,492 35,119 34,750 34,387
MICEX 2,407 30.90 1.30% 2,335 2,302 2,269 2,237
TSX 14,426 213.43 1.50% 14,103 13,979 13,856 13,735
KOSPI 2,010 16.55 0.83% 1,986 1,962 1,938 1,915
iBovespa 91,640 76.02 0.08% 86,047 84,460 82,908 81,383
IPC Mexico 42,237 226.82 -0.54% 41,106 40,535 39,972 39,413
AEX 493 13.35 2.78% 479 473 468 463
SMI 8,609 142.55 1.68% 8,330 8,231 8,134 8,038
FTSE/JSE TOP 40 46,156 533.60 1.17% 44,928 44,281 43,644 43,015
JALSH-All Share 52,203 533.01 1.03% 50,798 50,067 49,345 48,634
STI 3,053 40.33 1.34% 3,035 3,001 2,968 2,935
Hang Seng 25,578 516.63 2.06% 24,718 24,314 23,914 23,522
PSI Geral 2,854 70.09 2.52% 2,729 2,701 2,672 2,644
NZX 50 8,744 11.39 0.13% 8,737 8,664 8,591 8,519
Euronext 100 921 23.85 2.66% 897 887 877 867
Euro Stoxx 50 3,050 96.29 3.26% 2,943 2,910 2,877 2,845
NIFTY 50 10,702 29.25 0.27% 10,651 10,539 10,429 10,319
America PriceDayQ1/19Q2/19Q3/19Q4/19
Dow Jones 23,427 743.12 3.28% 22,667 22,327 21,993 21,662
S&P 500 2,532 84.16 3.44% 2,438 2,401 2,365 2,330
NASDAQ 100 6,420 273.34 4.45% 6,112 6,021 5,930 5,841
NASDAQ 6,726 262.28 4.06% 6,494 6,397 6,301 6,206
S&P MidCap 400 1,683 51.83 3.18% 1,615 1,591 1,567 1,544
US 600 862 29.51 3.54% 828 815 803 791
Russell 2000 1,380 49.66 3.73% 1,328 1,308 1,289 1,269
S&P VIX 21.39 4.06 -4.07% 27.21 26.80 26.40 26.00
US 100 9,599 228.32 2.44% 9,326 9,186 9,048 8,912
Ecuador General Index 1,415 8.95 0.64% 1,399 1,393 1,387 1,381
TSX 14,426 213.43 1.50% 14,103 13,979 13,856 13,735
iBovespa 91,640 76.02 0.08% 86,047 84,460 82,908 81,383
IPC Mexico 42,237 226.82 -0.54% 41,106 40,535 39,972 39,413
S&P/BVL Peru General Index TR (PEN) 19,243 125.36 -0.65% 19,137 18,971 18,805 18,643
Merval 32,128 31.51 -0.10% 29,320 28,362 27,435 26,537
IBC 1,857 174.98 10.40% 636 252 100 40
COLCAP 1,359 10.39 0.77% 1,311 1,297 1,283 1,269
IGPA 26,299 265.07 1.02% 25,748 25,541 25,333 25,128
BVPSI 447 3.38 -0.75% 449 447 444 442
BSX 1,940 0.00 0.00% 1,884 1,831 1,779 1,728
JSE 384,231 325.97 -0.08% 370,475 366,354 362,308 358,262
Europe PriceDayQ1/19Q2/19Q3/19Q4/19
FTSE 100 6,833 145.72 2.18% 6,622 6,551 6,482 6,414
FTSE All 3,734 76.03 2.08% 3,621 3,583 3,545 3,508
DAX 10,806 392.22 3.77% 10,400 10,265 10,131 9,999
CAC 40 4,744 133.18 2.89% 4,616 4,562 4,510 4,458
FTSE MIB 18,832 613.39 3.37% 17,883 17,610 17,343 17,080
IBEX 35 8,752 230.43 2.70% 8,357 8,262 8,168 8,075
MICEX 2,407 30.90 1.30% 2,335 2,302 2,269 2,237
AEX 493 13.35 2.78% 479 473 468 463
BIST 100 88,831 1,431.79 1.64% 88,052 86,456 84,896 83,353
SMI 8,609 142.55 1.68% 8,330 8,231 8,134 8,038
OMXS 30 1,435 41.77 3.00% 1,383 1,366 1,349 1,331
WIG 57,948 755.09 1.32% 56,799 56,068 55,343 54,629
WIG 20 2,285 37.73 1.68% 2,238 2,210 2,181 2,153
Euronext BEL 20 3,317 95.55 2.97% 3,174 3,139 3,104 3,070
Oslo Bors All-Share 938 23.42 2.56% 895 883 872 861
ATX 2,858 87.04 3.14% 2,707 2,670 2,634 2,598
OMX Copenhagen 920 18.42 2.04% 891 880 869 857
OMX Helsinki 9,029 274.02 3.13% 8,696 8,587 8,480 8,374
OMX Helsinki 25 3,808 118.35 3.21% 3,679 3,633 3,588 3,542
ISEQ 5,656 175.29 3.20% 5,411 5,347 5,285 5,223
Athens General 616 8.64 1.42% 596 586 576 567
PSI 20 4,880 133.95 2.82% 4,670 4,621 4,572 4,525
PSI Geral 2,854 70.09 2.52% 2,729 2,701 2,672 2,644
PX 1,004 14.16 1.43% 977 969 961 952
BET 7,665 194.09 2.60% 7,268 7,155 7,043 6,933
BUX 40,145 472.58 1.19% 38,841 38,253 37,678 37,110
PFTS 552 4.42 -0.79% 546 533 520 508
SAX 332 0.00 0.00% 328 323 318 314
LuxX 1,357 34.83 2.63% 1,296 1,276 1,255 1,236
CROBEX 1,730 0.12 -0.01% 1,720 1,709 1,698 1,688
SOFIX 580 5.50 -0.94% 584 580 575 571
SBITOP 802 2.27 -0.28% 798 792 785 779
OMX Vilnius 621 1.72 0.28% 611 605 600 594
BELEX 15 732 0.00 0.00% 756 750 745 739
MSE 4,513 1.23 -0.03% 4,488 4,462 4,436 4,411
CSE General 66 0.41 -0.62% 66 65 64 64
ICEX 1,189 13.75 -1.14% 1,202 1,189 1,176 1,164
OMX Tallinn 1,169 2.04 0.17% 1,155 1,147 1,139 1,131
MBI 10 3,529 30.98 0.89% 3,428 3,388 3,349 3,309
Euronext 100 921 23.85 2.66% 897 887 877 867
OMX Riga 944 8.76 -0.92% 913 898 883 868
SASX-10 629 1.67 0.27% 620 612 605 598
Euro Stoxx 50 3,050 96.29 3.26% 2,943 2,910 2,877 2,845
MONEX INDEX 10,840.49 8.58 0.08% 10,732.26 10,633.69 10,536.20 10,438.71
Asia PriceDayQ1/19Q2/19Q3/19Q4/19
NIKKEI 225 19,517 485.75 -2.43% 19,699 19,386 19,080 18,780
SHANGHAI 2,515 50.51 2.05% 2,425 2,385 2,346 2,307
CSI 300 3,036 71.03 2.40% 2,961 2,913 2,865 2,818
SHANGHAI 50 2,315 45.40 2.00% 2,226 2,189 2,153 2,118
SENSEX 35,631 116.94 0.33% 35,492 35,119 34,750 34,387
KOSPI 2,010 16.55 0.83% 1,986 1,962 1,938 1,915
DSE Broad 5,590 94.04 1.71% 5,336 5,287 5,239 5,190
JCI 6,275 53.53 0.86% 6,098 6,017 5,936 5,857
TASI 7,827 36.33 0.47% 7,698 7,607 7,517 7,428
TAIEX 9,383 109.91 -1.16% 9,429 9,306 9,183 9,063
ADX General 4,898 31.56 0.65% 4,828 4,783 4,738 4,693
SET 50 1,054 12.80 1.23% 1,035 1,023 1,012 1,000
FKLCI 1,670 6.05 -0.36% 1,653 1,638 1,623 1,608
STI 3,053 40.33 1.34% 3,035 3,001 2,968 2,935
TA-100 1,324 13.04 -0.98% 1,319 1,305 1,291 1,277
Hang Seng 25,578 516.63 2.06% 24,718 24,314 23,914 23,522
PSEi 7,761 80.51 1.05% 7,377 7,266 7,157 7,050
KSE 100 37,547 5.48 0.01% 37,214 36,693 36,180 35,674
KASE 2,316 22.61 0.99% 2,282 2,259 2,236 2,213
QE 10,350 70.01 0.68% 10,130 9,997 9,864 9,734
HNX 101 0.33 0.33% 101 99 97 95
VN 881 2.68 0.31% 875 859 843 827
Kuwait Price 6,633 0.00 0.00% 6,595 6,557 6,519 6,481
SECTMIND 416 0.00 0.00% 413 411 409 406
MSM TOP 30 4,276 26.26 -0.61% 4,295 4,261 4,227 4,194
ASPI 6,068 9.18 0.15% 6,027 5,992 5,957 5,923
Blom 973 2.04 -0.21% 971 964 958 952
ASE 1,926 8.77 0.46% 1,906 1,894 1,883 1,872
DFM general 2,526 5.49 0.22% 2,497 2,473 2,450 2,427
LSX Composite 821 1.30 -0.16% 823 811 798 786
MSE TOP 20 21,714 46.70 0.22% 21,175 20,887 20,604 20,323
NIFTY 50 10,702 29.25 0.27% 10,651 10,539 10,429 10,319
All-Share Index 5,138.94 29.32 0.57% 5,079.98 5,050.35 5,021.22 4,992.10
Nikkei Volatility Index 29.32 1.81 6.58% 28.86 28.40 27.95 27.51
Estirad 1,325.76 3.71 -0.28% 1,322.69 1,315.91 1,309.26 1,302.62
Australia PriceDayQ1/19Q2/19Q3/19Q4/19
Australian All 5,677 29.50 0.52% 5,572 5,520 5,468 5,417
ASX 50 5,558 36.40 0.66% 5,520 5,468 5,417 5,366
ASX 200 5,610 24.91 0.45% 5,506 5,454 5,403 5,352
NZX 50 8,744 11.39 0.13% 8,737 8,664 8,591 8,519
Africa PriceDayQ1/19Q2/19Q3/19Q4/19
NSE-All Share 30,639 132.42 -0.43% 30,879 30,494 30,112 29,734
FTSE/JSE TOP 40 46,156 533.60 1.17% 44,928 44,281 43,644 43,015
JALSH-All Share 52,203 533.01 1.03% 50,798 50,067 49,345 48,634
Egypt EGX 30 13,265 60.33 0.46% 13,002 12,802 12,605 12,411
Casablanca CFG 25 11,121 66.69 -0.60% 11,290 11,217 11,144 11,072
Nairobi 20 2,810 12.63 -0.45% 2,812 2,790 2,769 2,748
NSE All Share 140 0.49 -0.35% 139 138 137 136
DSEI 2,032 0.80 -0.04% 1,975 1,952 1,930 1,908
TUN 7,186 17.00 -0.24% 7,147 7,091 7,036 6,981
GGSECI 2,502 15.46 -0.61% 2,472 2,448 2,424 2,400
NSX Overall 1,300 16.90 1.32% 1,285 1,262 1,240 1,218
SEMDEX 2,217 2.85 -0.13% 2,211 2,203 2,195 2,188
Gaborone 7,863 11.31 0.14% 7,819 7,786 7,754 7,721
Zimbabwe Industrial Index 487.38 6.54 1.36% 472.32 457.95 444.02 430.53

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