Investors optimistic about 2019 despite uncertainty about Trump administration

Top-notch investors aren’t quite sure what to make of the president’s administration, according to new survey results from Bankrate.

Most professionals surveyed (38 percent) indicated they were either uncertain or did not have an answer as to whether investors were being helped or hurt by the actions of President Donald Trump’s administration, according to the Q1 2019 Market Mavens survey. Overall, the group still expects to see gains in 2019.

A quarter of respondents were neutral on whether the Trump administration’s tariffs, tactics and tweets were creating a benefit or toll for Wall Street.

Of the experts who strayed from middle, 25 percent said the actions of the Trump administration were benefiting investors; almost 13 percent said they were hurting.

Investors are getting a little bit of both: hurt and help, says Curtis Holden, CFA, senior investment officer at Tanglewood Total Wealth Management.

“Some Trump policies – corporate tax cuts and deregulation – are very pro-growth while other more recent policies – arguing with trade partners and criticizing the Fed –  have been disruptive and are fanning uncertainty in the economy,” Holden says.

The trade talks are one area, for example, giving investors pause. While renegotiated trade with China could lead to longer-term positives, the negotiations and policies are disruptive in the shorter term.

“The market tends to evaluate the next six to 12 months rather than the next 10 years,” Holden says.

The Q1 2019 Market Mavens Survey was conducted from Jan. 9-16 via an online poll. Sixteen experts from investment firms and research organizations provided answers.

Experts predict double-digit gains for stocks

While the White House may leave investors scratching their heads, on average the experts told Bankrate they expected to see the S&P 500 reach a full-year double-digit percentage gain, despite losing ground in 2018.

On average, the investors expect to see the S&P 500 index finish 2019 at 2,817.08, up 12.3 percent from the close of 2018 and 5.4 percent from 2017.

The survey released Monday finds that professional investors remain bullish on the outlook for stocks through the end of this year, says Mark Hamrick, senior economic analyst at Bankrate.

“Despite the extreme volatility, both in the stock market and the Washington-centric news cycle, the recent bounce in the market can be seen as a basis for optimism for the full year, or so one hopes,” Hamrick says.

However, he was quick to caution, “Events of the past few months have served up a dramatic reminder that when volatility to the downside appears to be in hiding for good, it can return with an attention-getting vengeance.”

Bigger gains in US or global stocks? It’s a toss-up

Analysts are evenly divided on the question of whether the U.S. or global equities will lead returns in 2019.

Among the experts, 44 percent said investors would see the best returns in the U.S. market; the same percentage said the better returns would be found globally.

Almost 13 percent of respondents indicated that returns from stocks would be about the same in the U.S. and global markets.

Uncertainty is likely here to stay for 2019, says Bob Phillips, managing principal at Spectrum Management Group.

“Non-U.S. developed and emerging markets currently trade at a discount to the U.S. due to greater uncertainty about their growth rates and recession possibilities,” Phillips says. “Those markets will trade higher due to the discount but likely will not exceed U.S. returns when adjusted for currency.”

Industry professionals were split on whether people should look to growth or value stocks in 2019.

Most (44 percent) said growth stocks – shares of a company expected to increase in value rather than pay higher dividends – were likely to provide the greatest returns throughout 2019, according to the survey.

A quarter of respondents disagreed, opting for value stocks, which tend to provide a higher dividend yield and trade at a lower price.

Twenty-five percent of experts expected growth and value stocks to yield about the same results. Meanwhile, 6 percent of the panel had no answer.

10-year Treasury yield expected to climb

An advance in the stock market would come amid a backdrop of rising Treasury yields.

On average, the experts see the yield of the benchmark 10-year Treasury note ending the year at 3.04 percent, up from the 2.69 percent at the end of 2018.

Rising 10-year Treasury rates are thought to create a headwind for the stock market. The impact of rising rates can be felt throughout the economy, making debt costlier for mortgage holders and those with credit card balances.

Methodology

Bankrate’s first-quarter 2019 survey of stock market professionals was conducted from Jan. 9-16 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Robert A Brusca, chief economist, Fact and Opinion Economics; Marilyn Cohen, president of Envision Capital Management Inc.; Brett F. Ewing, chief market strategist, First Franklin Financial Services; Kim Forrest, Fort Pitt Capital Group, senior portfolio manager and vice president; Jeffrey A. Hirsch, CEO of Hirsch Holdings Inc. and editor-in-chief of Stock Trader’s Almanac; Curtis Holden, CFA, Tanglewood Total Wealth, senior investment officer; Hugh Johnson, chairman and chief investment officer, Hugh Johnson Advisors; Audrey Kaplan, head of global equity strategy, Wells Fargo Investment Institute; David Lafferty, chief market strategist Natixis Investment Managers; Tom Lydon, ETF Trends, publisher; Brian Nick, chief investment strategist, Nuveen; Patrick J. O’Hare, Briefing.com, chief market analyst; Jim Osman, founder and CEO, The Edge Group; Bob Phillips, Spectrum Management Group, managing principal; Sam Stovall, CFRA Research, chief investment strategist; Wayne Wicker, Vantagepoint Investment Advisers, chief investment officer.