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2019 Investment Thesis


It's that time of year - I compile all my research and create a strategy for the coming year. This includes my best ideas, forecasts and expectations. Let's jump in. I think the Fed continues to tighten. This means deleveraging the balance sheet and increasing rates. I anticipate 3 rate hikes, each one +0.25%. I believe Global Trade negotiations will progress, possibly arrive at new agreements. This is true specifically of U.K., China and the US. Given the result of the recent mid-term elections, there will be more political stagnation. The US dollar will begin to weaken, giving way to commodity price fluctuation. Our market cycle might not peak, but the credit cycle will. This means we will begin to see expansion in high yield bond spreads, delinquency and default rates will rise. 2018 appears to be peak margins for corporations, this means slowing growth in 2019. I believe this will lead to heightened sensitivity and increased volatility.

1. US economic expansion will slow; still positive, but will highlight some aberrations.

2. European growth and relative value will make it a tough trade to ignore.

3. Emerging Markets were beaten up in 2018, 2019 looks to be a better year.

4. Until tariffs are lifted and a better, long-term solution is crafted, commodity prices will swing.

5. Technology and Healthcare are poised to outperform.

6. US GDP growth: +2.4%

7. S&P 500 earnings growth: $173.69

7a. S&P 500 P/E ratio: 16.8

8. S&P 500 Price target: 2917.99