Last week we ran a 2019 markets outlook survey with our readers and friends on social media; today we have the results. We’ll review each question, your collective responses ranked by percentage, and a few thoughts on the results. (Percentages may not add to 100% because of rounding).
Q1: Job descriptions of respondents:
- Investment advisor: 29%
- Investment manager/buyside analyst: 28%
- Brokerage industry professional: 11%
- The remaining 32%: Retired/Student (11%), “Other” (20%) and Media (1%)
- Total number of respondents: 168, all of whom answered every question (randomized choices where appropriate)
Q2: Which asset class do you think will perform best in 2018?
- US stocks: 36%
- Emerging Market stocks: 33%
- Gold: 11%
- Cash/T-bills: 8%
- Long term (+10 year) US Treasuries: 6%
- EAFE (non US developed economy) equities: 5%
Q3: Which asset class do you think will perform the worst in 2019?
- EAFE (non US developed economy) equities: 24%
- Long term (+10 year) US Treasuries: 23%
- Cash/T-bills: 20%
- Gold: 10%
- Emerging Market stocks: 13%
- US stocks: 10%
Our take on these two mirror-image questions:
- US/Emerging Market stocks (the 2 overwhelming favorites here) could tread water for the next 11 months and still beat cash/Treasuries and likely gold/EAFE. What the responses clearly show, however, is confidence that 2019 will not replicate 2018’s terrible global stock market performance.
- EAFE stocks are pretty unloved, likely because they don’t have EM’s beta or US stock’s defensive characteristics.
Q4: Which US large cap industry sector will perform the best in 2019?
- Technology and Financials: 20% for each
- Health Care: 19%
- Energy: 11%
- Industrials and Utilities: 5% for each
- Consumer Staples and Real Estate: 5% for each (4.8% actually – one vote less than the 2 prior groups)
- Consumer Discretionary: 4%
- Communication Services and Materials: 3% each
Our take: we were surprised to see Financials sharing most-favored sector status with Technology. As we parsed the data from other questions, we saw why so many chose this group – hold that thought for a minute…
Q5: What will be the yield on US 10-year Treasuries at the end of 2019?
- Less than 2.5%: 8%
- 2.50% to 2.75%: 24%
- 2.76% to 3.00%: 33%
- 3.01% to 3.25%: 28%
- More than 3.26%: 7%
Our take: we were also surprised to see this benign an outlook on long-term rates (only 35% of respondents expect to see a +3.0% yield at year end).
Q6: What do you think are the odds of a US recession (2 or more quarters of negative GDP growth) over the next 2 years?
- Less than 20%: 17%
- 21% – 40%: 33%
- 41% – 60%: 24%
- 61% to 80%: 16%
- Better than 80%: 11%
Our take: the balancing point here is exactly at 40% odds. Given the amount of chatter this topic receives that seems remarkably low. We purposely put a 2-year window into this question, expecting it to show +50% average odds. These responses do, however, help explain the US equity snap back for 2019 YTD.
Q7: Where do you think Fed Funds will end 2019?
- Lower than today: 11%
- The same as today: 24%
- 25 basis points higher than today: 45%
- 50 bp higher than today: 19%
- 75 bp higher than today: 1%
- While we presented a final choice of more than 75 bp, no one picked this option
Our take: 80% of respondents believe the Fed will (at most) raise rates once in 2019. When paired with our long-term Treasury question, it seems 2019 will see the yield curve remain quite flat but not invert (signaling a recession).
Q8: When do you think the US and China will come to a meaningful agreement on trade?
- Before the end of March 2019: 13%
- In Q2 2019: 38%
- In Q3 2019: 13%
- In Q4 2019: 8%
- I don’t see an agreement this year: 28%
Our take: our respondents expect to see some can-kicking on US/China trade negotiations into Q2, but not much further.
But… Those who thought a meaningful agreement would not come in 2019 were more positive on Financial stocks (27% picked that group vs. all respondents at 20%) and less inclined to overweight Technology (9% vs. 20%) than the average survey taker. That makes sense: a lengthy trade war would hurt Tech and might even push the Fed to lower interest rates (historically bullish for banks).
Q9: Do you think a split Congress between Democrats and Republicans is good or bad for US equity market performance?
- Makes no difference: 47%
- Good for stocks: 35%
- Bad for stocks: 18%
Our take: Democrats holding the House may look spicy to the political class, but investors say “meh”…
Q10: Which potential IPO would you be most likely to buy, assuming valuations were reasonable?
- Airbnb: 16%
- Palantir: 13%
- Uber: 13% (12.5% actually – 1 fewer vote than Palantir)
- Lyft and Slack: 6% each
- Cloudflare: 4%
- Pinterest and Robinhood: 3% each
- I would not buy any of these IPOs: 37%
Our take: IPOs aren’t for everyone, but those who play them like Airbnb’s business model the most of any likely headline IPO in 2019. And while Palantir is far from a household name, Big Data analysis can clearly hold its own with ridesharing when it comes to investor interest.
Q11: How do you think bitcoin will perform in 2019?
- Down more than 20%: 17%
- Down between 11% – 20%: 12%
- Flat – between down 10% and up 10%: 33%
- Up between 11% – 20%: 7%
- Up more than 20%: 8%
- No opinion: 24%
Our take: the worst of bitcoin’s declines since the 2018 bubble burst are past, according to our respondents.
Finally, thank you to all who took our survey. We’ll be back later this month with a new set of questions with a technological disruption theme.