Slower Growth and Market Returns in 2019

By Brent Puff - January 10, 2019

As we head into 2019, equity markets are pricing in a decidedly pessimistic outlook with regards to the global economy and the pace of growth in corporate profits.

The market’s pessimism is a by-product of the following factors:

  1. Weaker economic activity, which has thus far been focused in non-U.S. geographies, particularly in Europe and China.
  2. Escalating trade tension between the U.S. and its key trading partners, particularly China.
  3. Concern that the U.S. Federal Reserve’s monetary tightening path is too aggressive, given the deterioration in forward growth expectations.
  4. The economic cycle is extended.

While we acknowledge the pace of growth is likely to slow in 2019, we do not believe recession is lurking around the corner. We also believe that the abrupt and broad-based sell-off in equity markets has created opportunities to invest in great companies at attractive valuations that are likely to continue to be successful, even as the overall pace of growth moderates.

In my latest video, I outline these issues in more detail and discuss why we believe the market’s fears might be overblown.


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    Will Corporate Profits Continue to Rise in 2018?

    Market valuations today are relatively high versus long-term averages. As interest rates rise, that's likely to be an impediment to future stock returns. We think the opportunity for stock prices to move higher is going to be more dependent on the rate of corporate profit growth in 2018.

      Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

      The opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

      References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.

      Portfolio managers are not licensed by the Hong Kong Securities and Futures Commission to perform any regulated function in or from Hong Kong. Furthermore, none of the portfolio managers are located in or operate in or from Hong Kong.