Forecast: 2019

Milton Friedman claimed that a government will revert to the norm six months after a newly elected president. They will oppose his policies if they are counter to the status quo interests. I guess Milton never met Donald Trump. President Trump has fired staff and shown antagonism for opposing parties who do not accept his views. The focal point on domestic policy is the Border Wall. The issue on trade effects global trading.
President Trump has displayed to opposing parties by shutting down the government, his determination and resolution. This is important because it tells the Chinese that he is serious and he is in it for the long haul. On the latter I hope he is sincere. Personally, I would ban trade with China because they have demonstrated ill will. They force exporting companies to reveal all their data on their products. Then, they steal ideas to develop competing products. They disrespect patents and "clone" products. They substitute cheaper ingredients in licensing agreements. They place high tariffs on items that they cannot manufacture to close off competition. All of the above and more is why the leadership of China is nothing more than thugs in international dealings.
Bottom line: The two focal points listed above will determine the outlook for 2019. With that said the market will be range bound until March. If a new trade deal is made with China, the market will get a relief rally and then, look to fundamentals. The fundamentals at this point remain strong and contrary to Sebastian, I see an up year in the economy, but I agree with him, dark clouds are forming.
First Dark Cloud:

The Fed. No one will say it because the truth will destroy the economy. The truth is that fiat money is a complete failure. The Federal Reserve could never raise interest rates close to what was once normal. Just the thought of rates approaching 3.75% sends the market down on an express elevator. All of our governments - local, state and national are suffering from debt due to easy money. The unspoken realization scares the hell out of all elected leaders. Our national debt grows at twice the level as does our economy. If we had normal interest rates our national debt would double and the global community would seek a new reserve currency. If that ever happens, our economy would implode. The hated, barbaric relic of gold kept government in check as well as the banking industry and the military. Those two joined forces for self interest to get us off the gold standard. The accumulated wealth of our great nation took a long time to use up, but it is almost empty. The killing of the middle class is the reflection of the empty vault of the nation's wealth.
Internal conflict: Jay Powell could be fired. The market will be fearful of this happening. He has already come out saying that the Fed has no preset formula to raise rates. Two months ago, he said that there would be three hikes in 2019. Then, he revised that call down to two increases. Now, he says maybe just one. He will pause for his job. Two other governors of the reserve, Kaplan and Williams stated that it is best to pause or even cut the rate. This, dear reader is further proof of the failure of fiat money. The economy is suppose to be fully recovered and even with low interest rates, it cannot get out of its own way.

Housing and other clouds

This is the most important aspect within our economy. Single family home sales are down, but multifamily housing continues to grow. This trend will continue. More and more citizens will become economic prisoners to rentals. Housing prices will return to normal growth rates of 2% to 3%. Rents will rise. In some cities rents consume 50% of tenants income. This is not sustainable for an economy. You saw the riots in France when fuel subsidies was eliminated. We will have the same type of backlash here in the US over renting and housing costs. Also, note, James Stack who called the housing recession of 2008, is on record as seeing the same bubble bursting again in housing.

Autos

Sales of autos reached 17.2 million for 2018. This is a record because the industry eclipsed 17m for four straight years. The Japanese are worried by the number four. I do not see a fifth year of over 17m sales. The market will slow, however the impact of electric vehicles will begin to have an effect. The oil industry will not see a growth year due to the emergence of electric cars. A quick thinking politician will try to get a name for himself by calling for recharging stations on interstate highways.

Banks

The shills will say that the industry will grow by double digits. They do every year. They point to the aspect that banks make money even in this low interest rate level. Banking will face the growing competition of internet banking and I see them offering similar perks to stem this competition. They have the Fed backing them up. They will maintain their status and power.
International banks are not as strong as US banks, however they are connected in this interconnected world. Derivatives could cause a global liquidity crisis to which no bank is safe. This fear only gets worse with time.

Healthcare

This is a growing field due to demographics. The concern will be Obamacare and health insurance. President Trump may make a deal with the Democrats on passing the new NAFTA deal and the Border Wall and allow Obamacare to continue. In any event prices will rise for medicine and insurance and yet, this inflationary aspect will never enter into the lingo of the Fed.

Energy

Oil prices will continue to drift lower until the end of January. If you recall, Sebastian informed you of this price action as he said to find a low price oil firm and get some shares before the OPEC oil cuts begin to raise the price of oil. I see oil returning to $60 by April. As stated above, the growth in electric vehicles will put a cap on oil prices.

Utilities

The industry is changing. More and more utility companies are dropping coal. Nuclear lobbyist are always in the mix, but everyone on this blog is against nuclear energy. The impact of solar and wind is growing and they will continue to grow. Stocks in this segment will be appealing as the Fed pauses their interest rate hikes.

Airlines

The industry will get more fliers and the firms that have forward looking fuel contracts will do the best. This could be the last good year for awhile for the industry.

Consumer Staples - Retail

They remain constant with steady growth due to population growth. The problems will be in distribution. Many retail locations will close as more malls and shopping centers fall into bankruptcy. The continued growth in ecommerce will stall as taxation of internet sales becomes law of the land. The general population will realize the importance of their local shopping centers. Amazon will see their growth rate slow.  

All in all the stock market should find its footing and I believe it will have a good year even though volatile for a period of time. This will be the last year of the bull market as 2020 will be a major transitioning year for the US and our economy.