As investors ponder what this year may hold in store for the markets, the inter-relationships between politics, economics, fiscal policy, monetary policy, and corporate actions can seem very complex. Investors may feel overwhelmed and seek a simple answer. When people feel there is a situation that is out of their control or is too complicated to analyze, they often fall back on rules of thumb to make decisions.
After last year’s U.S. tax cuts contributed to better growth and market performance, a number of major countries are looking to reverse the declines in growth and voter satisfaction with tax cuts in 2019.
Global growth is likely to slow in 2019 as the economic cycle nears a peak. International stocks may continue to see heightened volatility and could enter a bear market if key indicators continue on their current path.
Ominous signs for the world economy may be causing stocks to price in an imminent global recession. However, these appear to be isolated, short-term events that already show signs of stabilization. Growth may rebound in the near-term and offer some relief for stocks.
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