By Jeff Reeves, MarketWatch
Tesla stock won't go anywhere either, and Big Tech stays on the outs
At the end of 2017, I made some predictions for 2018 -- and I'm back with my crystal ball to do so again for the year ahead.
Some of my predictions last year (http://www.marketwatch.com/story/18-predictions-for-2018-on-the-stock-market-faangs-and-bitcoin-2017-12-28) held true, including a crash for bitcoin and a tumble for oil. However, other forecasts turned out to be wildly off base, including high hopes for biotechs and a prediction of a modest rally in the broader S&P 500.
Hey, you can't win them all.
Besides, prediction listicles like this one are as much about highlighting the important issues facing investors as they are about me staking a claim on a trend or investment theme. Even if you disagree with the calls themselves, hopefully you at least think about the other side of the trade and prepare your portfolio accordingly for the year ahead.
Here are my 10 bold and perhaps unpopular predictions for the market in 2019:
Apple doesn't recover. Now that Apple's stock(AAPL) has slumped about 40% from its 52-week high a few months ago, many so-called value investors are urging you to buy at these prices and be patient for an inevitable rebound. But as iPhone revenues had already been flatlining, U.S. consumers wary of high price tags and the trade war far from over, don't expect that rebound in 2019.
Read:Apple investors get burned for holding on too long, says Mark Hulbert (http://www.marketwatch.com/story/apple-investors-get-burned-for-holding-on-too-long-2019-01-03)
Tesla is stuck in neutral. Perhaps surprisingly, Tesla (TSLA) has been pretty stable over the last 12 months. In addition to general volatility on Wall Street, there were lots of fireworks around its Model 3 launch (http://www.marketwatch.com/story/tesla-damned-if-you-do-damned-if-you-dont-on-35000-model-3-analyst-2018-10-19), an SEC lawsuit against Elon Musk (http://www.marketwatch.com/story/the-sec-vs-elon-musk-what-the-lawsuit-means-right-now-for-tesla-investors-2018-09-28) and a host of other shenanigans in 2018. Though this is encouraging to some, I expect that to continue in 2019 as continued competition from legacy auto makers makes growth harder for Tesla, and generally cheap gas prices and weak auto sales in the U.S. keep the electric-vehicle revolution from really hitting top gear.
Read:The Tesla Model Y will be unveiled this year -- here are the latest updates (http://www.marketwatch.com/story/the-tesla-model-y-will-be-unveiled-this-year-here-are-the-latest-updates-2019-01-03)
Big Tech stays on the outs. While social media and the mobile revolution were great narratives in the last few years, fueling massive gains for the FAANGs and other high-profile tech stocks, the bloom is off the rose. From privacy concerns about Facebook (FB) to "peak smartphone (https://www.washingtonpost.com/news/the-switch/wp/2018/02/02/weve-reached-peak-smartphone-what-are-apple-and-samsung-going-to-do-now/?utm_term=.db1287b362f3)" to a general decline in tech worship as Silicon Valley culture has been increasingly exposed as reckless (https://www.wired.co.uk/article/move-fast-and-break-things-or-dont) and misogynist (https://www.vanityfair.com/news/2018/01/brotopia-silicon-valley-secretive-orgiastic-inner-sanctum), it will be harder for Big Tech to rely on vague growth narratives and investor goodwill to support nosebleed valuations in 2019.
Pot stocks implode. Remember all those aggressive pitches for bitcoin during the run-up to almost $20,000, and notice how they have evaporated? Expect the same thing to happen in the investing bubble that is marijuana stocks. I certainly don't begrudge traders who made money in picks like Tilray or Canopy Growth (WEED.T) last year. But the momentum looks to be moving to the downside, with a lot of pain in store for these stocks in 2019.
Read:The 'hostile' takeover offer for cannabis company Aphria is littered with red flags (http://www.marketwatch.com/story/the-aphria-hostile-takeover-offer-is-littered-with-red-flags-2018-12-28)
India stocks surge. India's GDP slowed in the second quarter, but remained the fastest in the world at a 7.1% rate of expansion. Furthermore, with China's economy definitely cooling off and investors leery of Europe amid Brexit and U.S. stocks after the plunge at the end of 2018, the timing may be right for a rotation into this rare bright spot of the global economy. It's a risky call, I know, but one that could really pay off.
Read:China cuts banks' reserve ratios by 1% as economy slows. the fifth cut over past year (http://www.marketwatch.com/story/china-cuts-banks-reserve-ratios-by-1-as-economy-slows-the-fifth-cut-over-past-year-2019-01-04)
A $20-billion-plus stock is taken private. It's the perfect storm for a megadeal: Valuations have backed down a bit, interest rates are still relatively low and corporate tax cuts have left firms with billions in more cash to deploy. Berkshire Hathaway (BRKA) (BRKA) already has plenty of history in making big deals, including the 2013 one with 3G Capital to take Heinz private for $23 billion (http://www.marketwatch.com/story/buffetts-berkshire-to-buy-heinz-for-23-billion-2013-02-14) or the 2009 deal to snap up railroad Burlington Northern Santa Fe for $27 billion (http://www.marketwatch.com/story/berkshire-buys-burlington-northern-2009-11-03). It's hard to deal with low growth rates amid public pressures, but plenty of smallish large-cap stocks could make very attractive plays over the medium- or long-term for someone with deep enough pockets to take them private.
The 10-Year Treasury doesn't crack 3%. Yields have fallen off a cliff since November, thanks to more dovish comments from the Fed and strong demand from U.S. and European investors looking for safe havens. Those trends will persist and keep yields relatively subdued.
Fed raises rates only once. In a related call, the Federal Reserve chickens out thanks to political pressure and softening economic data, raising rates only one time midyear.
Read:Martin Feldstein on 3 reasons why the Fed wants to keep raising interest rates (http://www.marketwatch.com/story/3-reasons-why-the-fed-still-wants-to-raise-interest-rates-2018-12-27)
ECB and BOE keep with easing.As I wrote recently (http://www.marketwatch.com/story/why-you-should-avoid-stocks-until-after-the-brexit-deadline-2019-01-04), the risks of a hard Brexit are very real. The Bank of England has already pledged it is ready to cut rates (https://www.theguardian.com/business/2018/dec/20/bank-of-england-keeps-interest-rates-on-hold) if things go south, which I expect to happen, and the European Central Bank has lately been losing its desire for rate increases (https://www.reuters.com/article/us-ecb-rates-poll/euro-zone-recession-risk-climbs-rate-rise-conviction-wavers-reuters-poll-idUSKBN1O90DG) that would move deposit rates out of negative territory. Expect central banks across the Atlantic to go very easy in 2019.
Read Mohamed El-Erian:Europe's struggling economy is like an all-star team that doesn't know what game it's playing (http://www.marketwatch.com/story/europes-struggling-economy-is-like-an-all-star-team-that-doesnt-know-what-game-its-playing-2018-12-18)
Also:Brexit's aura of inevitability is vanishing (http://www.marketwatch.com/story/brexits-aura-of-inevitability-is-vanishing-2018-12-27)
Oil stays under $75 all year. If that happens, it would mean that crude hasn't crested $75 since 2014 aside from a short-lived peak across a handful of sessions in early October right before oil began its lurch down into the $40s.
-Jeff Reeves; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
January 07, 2019 16:21 ET (21:21 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.