Jan 2, 2019

Wall Street analysts won't kill the bull market

Illustration: Aïda Amer/Axios

The issues that whipsawed stocks in 2018 — namely trade and the Fed — aren't going anywhere this year, leaving few catalysts to push stocks to new highs.

The big picture: Analysts overwhelmingly predict the historic bull run has at least one more year to go. The analysts who cut their expectations say they did so because of recent market volatility. "The world’s largest banks and money managers are gearing up for the last hurrah of one of the longest bull markets in history," Bloomberg writes.

Expand chart
Source: Yahoo Finance and analysis of Wall Street outlooks; Chart: Andrew Witherspoon/Axios

Wall Street outlooks reviewed by Axios say that although the U.S.-China trade war is the crucial factor for stocks, almost all feel good about the likelihood of a deal, despite the unpredictable nature of the trade conflict.

  • A continuing trade war would hit CEO confidence and create more uncertainty for capital expenditure plans.
  • And thanks to dwindling impact from the corporate tax cut, earnings growth is expected to fall to 8% from 20% this year. Add an escalation of the trade war and there will be no earnings growth next year, UBS strategist Keith Parker predicts.

The Fed may back off on hiking interest rates as quickly as previously planned, but the central bank will continue on the tightening path and won't revert to easing — despite what traders are betting.

  • As Axios' Dion Rabouin notes, Fed chair Jerome Powell's thinking may have shifted after the bleak performance of equity markets in December. But if the economic data remains solid, it's unclear how much further equities will have to fall in order to see the Fed really dial back its hawkish stance.
  • An added Fed wild card: This year brings more press conferences, and thus more chances for Powell to spook the markets. Or, if we're being optimistic, give the market more opportunity to adapt to Powell's communication style.

What to watch: We'll get some clue about how the biggest issues for the market may play out early in the year: Trade talks kick off within the next few days, and the Fed holds a two-day meeting and faces reporters in late January.

Go deeper

Powell and the risk-off bull market

Jerome Powell. Photo: Alex Wong/Getty Images

The Fed’s 180-degree turn was the story of 2019, asset managers and market analysts say.

What happened: Chairman Jerome Powell and the U.S. central bank went from raising interest rates for a fourth time at the close of 2018 and giving market watchers the explicit expectation this would continue in 2019, to doing the opposite. The Fed cut rates thrice and even began re-padding its balance sheet in the last quarter of the year, bringing it back above $4 trillion.

Go deeperArrowJan 2, 2020

S&P 500 doubled its average return under past presidents during Trump's first 3 years

Photo: Nicholas Kamm/AFP via Getty Images

The S&P 500 has had a return of over 50% during President Trump's first three years in office, more than doubling the average return of 23% at the same point in a presidential term since 1928, CNBC reports.

The big picture: The market, which hit record highs across the three major indices, got a sustained lift in 2019 after Federal Reserve Chair Jerome Powell lowered interest rates three times, the first such moves since the end of the financial crisis.

Go deeperArrowDec 26, 2019

The stock market's quiet end to 2019

Data: Money.net; Chart: Axios Visuals

The S&P 500 rose half a percent on Thursday to top the 3,200 level for the first time.

The big picture: A year that saw equity prices whipsawed by trade war uncertainty and recession fears is ending (so far) on a relatively quiet note.

Go deeperArrowDec 20, 2019