With 2018 coming to a close and 2019 right around the corner, it’s time to take a look at what happened over this past year and what investors can look forward to in the coming year.
With that said, let’s dive into the recap of 2018 and the outlook of 2019 with some “thin” stock market predictions.
Stock Market in 2018
On January 2nd, 2018 – the first trading day of the new year – the Dow Jones Industrial Average was priced at 24,824.
At the time of this writing, the Dow Jones was priced about the same.
Overall, the market has mostly moved sideways in 2018.
There have been plenty of ups and downs throughout the year, but these ups and downs have canceled out to create very little change in the market.
In spite of the fact that the market has moved sideways throughout 2018, valuations remain very high. Right now, the Shiller PE ratio – a ratio that reflects the average PE of all the companies in the S&P 500 – is at 26.6.
This is almost double the average Shiller PE ratio since the late 1800s, which is 15.68.
It’s also nearing the all-time high of the Shiller PE ratio, which took place when the Shiller PE ratio hit 44.19 in December of 1999.
For those trying to find good investment opportunities in the market in 2018 – opportunities to purchase a company at a price that is on sale compared to its value – these high valuations haven’t been good news.
However, it looks as if they might be on the verge of coming to an end.
What does that mean we can expect for 2019?
All of the signs indicate that we’re in for a significant stock market correction across the market in 2019.
Bull markets never go on forever without a correction, and this current bull market has been trudging along since March of 2009.
It’s certainly possible that it could continue well into 2019, if not 2020, but the market’s sideways movement in 2018 combined with high valuations across the board make that very unlikely.
Far more likely is the possibility that we will see corrections across the market of 20% or higher as the bull market reaches the peak of its run and begins to tumble down.
Some companies may see corrections even higher than 20% depending on the industry that they are in and the specific company itself.
While this is certainly concerning news for some investors, it’s also quite exciting if you know how to prepare for it.
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Stock Market Predictions for 2019
The answer is to get your shopping list of quality companies out and get your cash ready – a lot of great buying opportunities are about to come available.
Corrections like the one we might see in 2019 don’t come around very often, and they are always excellent opportunities for investors who have cash to spend and time to wait on the market to climb back up again – a process which typically begins less than a year after a large correction and sometimes as soon as a couple months.
If you approach 2019 with this mindset and strategy, it is sure to be an exciting time.
For the first time in years, investors will have the opportunity to scoop up high-quality companies at low prices, setting themselves up for some considerable gains in the years to come.
However, it’s also important for those who are already invested to keep in mind that 2019 is not the time to sell off the stocks that you own.
What are your stock market predictions for 2019? If you’re ready to learn how to invest Rule #1 style in 2019, click the button below to sign up for my free investing webinar.
Phil Town is an investment advisor, hedge fund manager, 3x NY Times Best-Selling Author, ex-Grand Canyon river guide, and former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo, and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence.