What Can You Expect in the 2019 Market?
We’ve seen a correction in the market, but does that point toward something more sinister looming ahead?
Economist Brian Wesbury, of First Trust, joined us recently to explain.
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Today I’m delighted to be joined by Brian Wesbury, economist of First Trust, to talk a little bit about the state of the market in 2019.
The market went through a massive correction of about 20% in 2019. “Bear markets” occur when we have recessions, and although some people have been calling our current market a bear market, Brian thinks they’re a bit off. The term bear market is designed to scare people, and when we take a closer look, it doesn’t really apply to what we’re seeing now.
To create wealth over time, we have to deal with the type of volatility we’ve been seeing. It’s the price we pay emotionally. The drop in GDP over the last year has caused us to go through a slowdown, but this has happened eight or nine times in the last 10 years. A GDP slowdown like this doesn’t necessarily mean a recession is coming, either. Right now, the No. 1 indicator of a recession is when the Federal Reserve tightens excessively. We haven’t gotten there yet, according to Brian.
The No. 1 signal of a recession is
when the Fed tightens excessively.
Right now, the consensus in the market is that we’ll maybe go through one or two rate hikes in 2019, with possibly as many as four. Even at 3.5%, there’s still a massive amount of excess reserves and bank liquidity in the system. Corporate assets and profits remain high, and there’s no evidence that monetary policy is getting too tight today.
Thanks to Brian for joining us and educating us on what’s really going on in the market. If you have any questions for me in the meantime, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.
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