Prudential’s chief market strategist says that as we enter 2019, it may be difficult to remember the exuberance that greeted 2018.
- Fed’s seemingly steadfast commitment to raising rates and unwinding of its balance sheet fuels market concerns
- China may find path toward policy changes to end tariff war
- Troubles brewing in corporate debt markets
As we enter 2019, it may be difficult to remember the exuberance that greeted 2018. After all, the synchronized global economic recovery, which had been a predominant theme for most of 2017, helped spur consumer and business confidence, while the new $1.5 trillion Tax Cuts and Jobs Act signed into law December 22, 2017, helped ensure a strong and optimistic foundation for 2018. By early April, however, signs of slowing global growth began to emerge, even though the U.S. economic expansion was gaining momentum and corporate earnings on the top and bottom lines were delivering stellar returns.
Fast forward, and markets now are discounting an economic slowdown in the U.S. as well. But there is an abiding question: Are we transitioning to a slower but still solid economy, as the Federal Reserve suggests, or a deeper downturn that could result in a recession? The global synchronized recovery itself has been rebranded as the global synchronized downturn. The debate as to what brought an unraveling to a market that has only rewarded the most defensive sectors and Treasuries focuses primarily on the Federal Reserve’s path toward interest rate normalization and unwinding of its balance sheet. That’s coupled with—or exacerbated by—uncertainty surrounding the tariff war with China. Add to the list the allegedly waning “sugar high” of the tax cuts, Brexit uncertainty and market volatility triggered by high-frequency trading gone hyperbolic.
Read Quincy Krosby’s full Q1 2019 market commentary: “Recalculating”
To talk to Quincy Krosby about her views of the market, contact Lisa M. Bennett.
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Lisa M. Bennett