A slowdown in market growth is widely predicted by analysts, so it helps to decide on the strategy to adopt.
In stock trading and investing you need to think of and plan for any contingency. If that adverse situation doesn’t arrive, fine. But if it does, you need to be well prepared for that. So let’s look at a contingency here, something that’s being widely forecasted. Market Growth for 2019 is a big question and we need to prepare
Let’s suppose there is a selloff all through the market. How would you respond to it? Analysts from Barclays and Goldman Sachs have been extremely cautious regarding the potential for market growth in 2019. A defensive strategy, by which traders protect the portfolios they have, is what they suggest in this situation. It’s an officially red situation for the S&P 500 in 2018.
Goldman Sachs Forecasts Headwinds for Market Growth
Goldman Sachs says, the S&P 500 will have a $2,850 close this year while in 2019 it will close at $3000. They have also mentioned many headwinds that the broader market would have to deal with. GS estimates that with the full 25% tariffs levied on all Chinese imports, there could be a significant impact on the earnings with any profit growth potentially eliminated. Goldman analysts therefore recommend that you raise cash to represent a really “competitive asset class to stocks”. Defensive sectors are preferred by Goldman within equities, while utilities are considered “overweight”.
Flat Growth Forecasted by Barclays
Barclays’ analysts say, 2019 will witness flat growth. Their year-end target for the S&P 500 stays at $3000 for 2018 as well as 2019. Barclays has warned that boosts such as tax cuts in the corporate and personal level are just one-offs. The investment bank is also bracing for the adverse effects of increasing trade tensions. It expects the EPS growth in 2019 to be 7%, as many of the one-off growth drivers fade. During 2019, economic growth and earnings are expected to normalize.
Wells Fargo Is Bullish, Citing Fear Factors as Highly Improbable
But the bearish outlook is not universal in Wall Street. Wells Fargo is among the bulls, whose strategist Scott Wren reckons that the potential factors inducing fear have a very low level of probability, though he’s quick to clarify that those probabilities aren’t totally impossible. Factors such as some mistake in the Fed’s policy, reducing margins and overall deceleration in growth globally are what Wells Fargo considers as having a low probability of occurring. Wren is of the opinion that investors need to be offensive and buy stocks to capitalize on a volatile period.
Factors that Could Drive Market Action
Wren believes that there are two major factors that can drive market action at the end of 2018 – any news regarding US trade and the December meeting of the Fed after which the Chair Jerome Powell would give a statement at the press conference. Wren reckons that some positive news could well send the S&P 500 shooting up to the region of $2,800 to $2,900. Consumer discretionary stocks, healthcare, financials and industrials are his recommendations.
As you can see, opinions among analysts are divided but there generally is an expectation of a slowdown among most of them. It is therefore better to stay prepared, but whether to go defensive or offensive depends on your portfolio. When going offensive or defensive it is important to have a low cost broker on your side. TradeZero provides commission free trading, extended leverage and one of the largest short lists anywhere.
This content is restricted to site members. If you are an existing user, please log in. New users may register below for FREE.