In 2019 Three Major “Risks” of the US Stock Market
Wall Street analysts expect that US corporate profit growth in 2019 will be significantly lower than in 2018.
At the beginning of 2018, the United States drastically reduced taxes for enterprises, making the company’s profit growth of 23% for the whole year. However, the impact of tax cuts has begun to recede. In 2019, corporate profit growth is hard to match in 2018.
In 2018, the US dollar index rose by about 5%, which also suppressed the profits of US multinational companies.
2. Global economic slowdown
The second longest economic expansion in American history is threatening.
Supported by tax cuts and the lowest unemployment rate since a generation, the US economy has shown its glory in mid-2018. The economic growth rate in the second quarter reached 4.2%, and the third quarter also had 3.4%. However, the Federal Reserve believes that the US economic growth rate will fall to 2.3% in 2019.
After decades of expansion, the Chinese economy has also slowed down. In 2018, China’s economic growth rate was the lowest since 1990. The outlook for 2019 is even worse.
Concerns about the slowdown in global economic growth have caused the US stock market to fall sharply from its all-time high at the end of September. Investors are also worried about Fed’s interest rate increase plan in 2019. If the rate hike is too fast, it may cause the US economy to fall into recession.
Conversely, if the Fed hints that it will stop raising interest rates, analysts believe that the US stock market may hit a record high in 2019.
3. Political instability
Washington and the UK almost lost their ability to govern, leaving investors confused.
No one knows what the outcome of Brexit will be. I only know that the outcome will be poor. If the Brexit agreement is still not reached on March 29, Savory can have disastrous consequences.
The US government is closed. In the short term, the impact on the economy may not be great, but the deadlock is not good news for the debt ceiling. This year, members of Congress must pass the bill, and the Ministry of Finance can continue to borrow money without restrictions. If the bill is not passed, US government debt may default. In 2011, the US government nearly defaulted, and the credit rating company Standard & Poor’s lowered its US credit rating. If it is lowered again, the cost of repaying debts in the United States will increase dramatically.
Trade tensions continue to put pressure on the US economy and the stock market. The United States imposes tariffs on goods imported from China, and these tariffs will eventually be passed on to consumers, who account for two-thirds of US GDP.
Trump wants to replace Fed Chairman Bauer and has not stopped. Investors may not like Bauer, but they want the government to agree with the Fed. Halfway threatening to replace the Fed chairman, fearing that the market will be in chaos.