As 2018 is coming to close, the state of the financial market is a hot topic. Many have made the prediction for another market crash. Reviewing the reports and trends from the 2018 quarters will help with forecasting the 2019 financial market. The Federal Reserve has an Open Market Committee who are responsible for setting targets for interest rates that have to be met in early November.
However, investors do not expect to see an increase until the mid-December conference. Therefore, investors have two things to consider:
Analyze the economic replicated data that the policymakers monitor and use the reports to create an idea of what the interest rates will increase to in the year 2019. The Fed has gathered that there will be approximately three rate increases for 2019, but several investors agree there will be only two rate increases. An important fact is the strength of the U.S. economy. Is the economy continuing to see any indications of solid economic growth or is the economy slowing down just as the people have suspected?
As for inflation, there are two different measurements to watch for such an indication of the federal rate increase to change. Without there being a drastic change from the recent 2% inflation trend then the market is headed toward an unpredictable short-term quarter.
Investors on Wall Street have been conducting surveys as well as strategists, financial advisors and retail investors with the hope that the U.S. stocks – ranging from short to long-term – will not prove to be unpredictable as the 2018 year has. Early November was the kick off for the earnings season. Investors have been conversing about how the impact of the large data variables, higher rates, increased raw material costs, lowered foreign currencies, tariffs and a decrease in demand from China. Investors are turning their heads toward 2019 predictions with this data instead of focusing on the third and fourth 2018 quarter earnings, which is not a bad idea.
Affected Gross Margins and Increased Interest Rates
Other factors for forecasting the 2019 market are the issues arising. This includes margin erosion. The margin erosion is closer to increased costs in wages and raw materials. Amazon has reported its $15 minimum wage will not interfere with the ending year quarter earnings, but there are flags indicating its effect on the 2019 financial market. Luckily, the higher costs with several companies are leaning toward increasing the prices for consumers instead. Stronger sales will create a strong margin in the market.
The increased consumer prices are another hopeful prediction for rising margins and increased revenues. In order to keep the revenue growth strong for 2019 is interest rates. If the interest rates remain higher on a permanent level, then revenue-driven earnings will rise. This may also result in the fall of valuation math. A crucial cause and effect for 2019. Tariff reports have investors on the outs with its effect. Many say tariffs are considered raw material all companies (only a select few). Those few companies have acknowledged their earnings may fall as a direct effect of tariffs.
David Zinsner commented that the expected gross margins will remain high in the first quarter of 2019. This statement was made by David in September of this year. The high margins will be linked to a healthy financial market. Now the end of the year quarters, effective September 24th, involving tariffs will have a 10 percent impact on the imports from China. The imports are estimated at $200 billion. Shifting the impact over the next three quarters is in the works.
The trade war with China has been scrutinized heavily by investors. This is a huge factor with the predictions for 2019’s financial market. The main concern is undermining the effect the trade war will have. Conservatives are hypothesizing a 25 percent tariff on imported goods from China. This would cause S&P 2019 earnings to slightly decrease from $170 to an estimated $159. This prediction suggests that 2019 fiscal earnings will be scientifically lower in comparison to 2018. As higher rates contribute to higher interest prices, the increased yields will be placed on many firms who have hefty debts.
How much of an impact does this cause in 2019? Several firms will be hit with the risks of stocks while others may see a rewarding rise with favorable stocks. This is why the prediction for increasing consumer prices is being pushed. Can the so-called market crash for 2019 come true? It is possible, but there is hope to retain a strong economy with increased stock prices