The markets closed out 2018 in the green as the Dow Jones Industrial Average rose 265 points, while the S&P 500 gained 0.85 percent and the Nasdaq Composite ticked 0.77 percent higher.
Trade war fears were allayed as U.S. President Donald Trump tweeted that talks with China were progressing in the right direction. The markets in 2018 were roiled by trade war news and more of the same could be the trend in 2019, unless the two economic superpowers can agree to a permanent trade deal.
“The threat of an escalating trade war has chilled US business confidence, with managers uncertain as to if/how they should restructure global supply chains,” Nicholas Colas, co-founder of DataTrek Research, wrote in a note to clients.
“The most bullish case here is that the tariff issue will be settled in Q1 2019, and a meaningful resolution should be enough to trigger a first half rally for stocks,” Colas added. “Against that optimistic take are two bearish outcomes: one, that these negotiations take longer and two, that they fail outright.”
U.S. stocks posted their worst year in a decade after what’s been a rough 2018 for U.S. equities with the Dow losing 5.80 percent, while the S&P 500 has shed 6.5 percent and the Nasdaq Composite is down over 4 percent. A confluence of trade wars, rising interest rates and volatility helped to bring the markets down after an extended bull run that peaked during the summer.
Surprises Abound for 2019
While 2018 will go down as a challenging market landscape for investors, one strategist, there appears to be light at the end of the proverbial tunnel. According to John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, the latest declines provide the perfect backdrop “for upward surprises in 2019.”