Despite the U.S economy displaying signs of strength markets are presenting an unnerved environment, portraying signs of a turbulent 2019. The U.S. 3rd quarter economic report showed the economy grew at a remarkable annualized pace of 3.5%. Adding 250,000 jobs; the unemployment rate remains at a 49-year low of 3.7%. Additionally, the report showed wage growth of 0.2% in the past month and 3.1% in the past year.
In spite of these results, the Dow dropped 774 points on Tuesday erasing all of 2018 gains; while the S&P 500 erased all of its year-to-date gains when it fell 1.82% on Tuesday. Similarly, the tech-heavy Nasdaq shrank by 119.65 points – down roughly 15% from its all-time highs. The combination of strong economic reports and weak investor confidence suggest investors anticipate a downturn for the US economy. Michael Wilson, an equity strategist for Morgan Stanley, wrote to clients “the market is speaking loudly that bad news is coming”.
Though the data from the research firm eMarketer suggests consumer spending will continue to drive the economy. Spending during this year’s holiday season is expected to outperform last years by 5.5%. Nevertheless, Morgan Stanley claims the stock market is already in a bear market as more than 40% of the S&P 500 is down 20% from recent highs. Large retail stores like Target Corporation (NYSE: TGT), Walmart (NYSE: WMT), and Gap (NYSE: GPS) have experienced losses of 17.06%, 3.07%, and 5.73% in the past month. Similarly, tech and online retail giant, Amazon, experienced losses of 16.42% in the past month.
Though Goldman Sachs official outlook reports suggest the bull market will continue into 2019 with the S&P 500 will end at 3,000 by year-end of 2019. Goldman expects growth rates to gradually decelerate to 1.6% by the 4th quarter of 2019 and 1.5% by 4th quarter 2020. This is due to the higher cost of borrowing, and the fading effect of the GOP tax cuts. The report does warn of Trump’s treat of 25% tariffs on Chinese goods could potentially eliminate any profit growth for 2019.