2018 is ending on an economic thud.
the next recession is around the corner has been
knocking down stock prices and our 401(k) plans. Word
that General Motors will be aiming to close some
factories next year only fuels the worry.
started as a fairly optimistic year is gradually turning
more and more pessimistic.
2019 really be as bad as some might think it looks?
Here’s a glimpse at what could happen ahead:
about the next recession?
more red flags are out there — including mounting
corporate debt, higher borrowing costs and the ongoing
tariffs that are part of the trade war.
shocking, one-day declines of 559 points and 799 points
for the Dow Jones industrial average during the first
week of December. The Dow was down about 1.2 percent for
the year through Dec. 10.
also seeing key warning signs coming from a weaker
housing sector, cooler rest-of-the world growth and
rising interest rates, according to Robert A. Dye, chief
economist at Comerica Bank.
recession a done deal for 2019? No, according to
recession risk is rising, many say solid growth in the
nation’s gross domestic product indicates that
recession isn’t in the cards for 2019. But 2020 is
looking more iffy.
increased my odds of a recession over the next 24 months
to 40 percent,” Dye said. He had put the odds at 35
percent in October.
Rankin, economist for the PNC Financial Services Group,
said he’d still put the odds of a recession beginning
in 2019 at one in four. If a recession doesn’t take
place next year, the odds go up to 40 percent that a
recession would hit in 2020, he said.
don’t occur just because the economy has been
expanding too long,” Rankin said.
he wouldn’t use a word like robust to describe the
kind of year to expect.
more in terms of “stable, uninspired, unexciting”
for 2019, he said.
high can interest rates go?
quarter-point rate hike is in the bag at the next policy
meeting for the Federal Reserve on Dec. 19.
go up in December as expected, the federal funds rate
will edge up to a range of 2.25 percent to 2.5 percent.
It would be the fourth rate hike in 2018 — following
five other rate hikes since the end of 2015.
Federal Reserve last raised rates in late September,
once again driving up the cost of borrowing for
consumers and business.
economists, though, are dialing down their forecasts for
rate hikes in 2019. Instead of three or four more rate
hikes, many now say the Fed will slow its pace and nudge
up rates one or two times in 2019.
Rankin expects the Fed to hold tight early next year and
move to raise rates at meetings in June and September.
storm clouds, though, mean the Fed likely would need to
stop raising rates by late 2019 — and possibly move in
end of next year, we expect the Fed to be forced to
reverse course and start lowering rates,” wrote Diane
Swonk, chief economist at Grant Thornton, in a December
Fed could need to react late next year to signs that the
economy is edging closer toward a recession.
Federal Reserve sounded “almost giddy” about the
economy earlier in 2018, Swonk noted that the Fed has
shifted its tone lately.
moved up her forecast for the next recession by six
months and now expects a recession to hit in the first
half of 2020.
going to happen to my 401(k)?
volatility on Wall Street gives the Fed more room to
pull back on raising rates. But it makes everyday
investors increasingly on edge.
Jones industrial average was down nearly 9 percent from
its record high of 26,828.39 points hit on Oct. 3
through early December.
yourself for more volatility ahead. The bull market
might — or might not — survive long enough to make
its 10th birthday next March.
Street market watchers suggest trimming one’s exposure
to U.S. stocks. But you don’t want to panic and bail,
especially if you’re investing for the long term.
Sowerby, managing director and portfolio manager with
Ancora Advisers, said some rebalancing may be worthwhile
for many investors.
warned that there continues to be more risk in the bond
market, as interest rates climb higher. So one cannot
simply sell stocks and buy more bonds as a way to run to
safety, Sowerby said.
economic growth slows significantly next year, Wall
Street could face more bumps ahead.
long-term investors willing to take on more risk,
Sowerby said, some beaten down groups include emerging
market stocks and select U.S. small company stocks.
your risk. Some suggest lightening exposure to growth
stocks. Consider parking some cash on the sidelines.
you’re prepared to ride out a storm, though, by taking
care to have cash in an emergency fund — and not
blindly plowing every dollar into your 401(k).
it cost me more to borrow in 2019?
answer, depends what you’re buying.
you’re shopping for a home, there’s a chance that
rates can fall from here.
30-year mortgage rate is around 4.9 percent on average
and could be heading toward 4.5 percent by the end of
2019, according to Greg McBride, chief financial analyst
rate is likely if the economy slows down and we edge
closer to a full-fledged recession in 2020.
rate — closer to 5.5 percent — could be possible for
mortgages if the economy keeps humming along and
inflation picks up, he said.
though, says it seems more likely that mortgage rates
will drop a bit later in 2019 as the economy loses
you’re planning to buy a car, expect to pay higher
rates since car loans track actions taken by the Federal
Reserve more closely.
five-year new car loan is averaging around 4.9 percent
now, according to Bankrate.com. The average rate on a
four-year used car loan is 5.72 percent.
another rate hike this month, and two next year, by the
end of 2019 auto loan rates will average 5.35 percent on
a five-year new car loan and 6.2 percent on a four-year
used car loan,” McBride said.
likely to happen to auto sales?
Chesbrough, senior economist at Cox Automotive, is
forecasting light vehicle sales in the 16.6-million
range in 2019, that’s down from a projected 17.1
million to 17.2 million cars and light trucks sold in
higher interest rates are starting to take a bite out of
consumers’ wallets,” Chesbrough said.
expects two, possibly three, more rate hikes from the
Fed in 2019. Higher rates drive up borrowing costs, so
it could be more costly to finance or lease a car later
in the year.
he noted that 16.6 million is a fairly strong year for
Motors is shifting away from its mix of sedans and small
cars to focus on the production of more profitable SUVs
and trucks, as part of a restructuring plan to stay
ahead of any broader economic downturn.
overall, the U.S. jobs picture, including the auto
industry, is expected to be good.
not expecting any kind of collapse in the market,” he