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First Quarter Forecast-2019

January 17, 2019

It’s that time of year when our thoughts turn to resolutions, goals, refreshing of bucket list ideas and even a bit of rumination regarding our course of life. Consistent with the traditions associated with the beginning of the year, we get to look back on our 2018 forecasts and offer our forecast for the next year.

 

Economic growth- encapsulated by U.S. Gross Domestic Product (GDP) – moved in synchrony with our forecast. We anticipated seeing year over year growth at 3.2%. While we do not yet have the fourth quarter numbers, we anticipate we will see 2018 GDP come in very close to our 3.2% forecast.

 

Stock Market – it just didn’t happen the way we anticipated. Through the first three fourths of the year we were right on target for our 10% positive move. Then, the fourth quarter happened. The stock market as measured by the S&P 500 had a total rate of return for the year of -4.38%.

 

Since driving forward by looking solely in the rear-view mirror is a recipe for disaster, let’s refocus our eyes on “what’s next” and take a stance on the year ahead.

 

GDP Forecast - We are going to start with economic growth – specifically looking at the growth we anticipate occurring in the U.S. We believe GDP will be positive; though at a lessor pace than what we experienced in 2018. Using a single point for our forecast – we think we will see GDP grow at a 2.8% increase in 2019.

 

Interest Rate Forecast - The training wheels are off interest rates. The Federal Reserve is intent on its mission to return interest rates to a place where they reflect “normalcy” – a term often used; but find difficult to define as it is a nebulous and moving target. We expect the U.S. 10-year interest rate to again climb higher by the end of the year, approaching a 3.35% yield.

 

Stock Market Forecast - This past year, more specifically, the last quarter of the 2018 year, created an attractive opportunity for stocks. We believe the increased volatility in the stock market is here to stay. This means we will see quicker moves, both up and down in the stock market. We expect to see returns from the stock market in the plus 15% area for the year.

 

Things to wonder about….

 

We have concern about world political stability – particularly in the Middle East.

Inflation – We think it is too early to claim that inflation has been tamed or that it simply won’t be a factor in our economic conversations.

Trump Presidency – While it may make for good theater, we hope the antagonistic relation between our elected representatives does not get so messy and ugly that they forget to govern the country.

 

We wish you a happy and healthy new year. May you be blessed with good fortune, happiness, health and peace in your life and in the lives of your loved ones.  

Tags:Markets without training wheels

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