2018 Holiday Eye on the Market: a note to my spouse on the 2020 US Presidential election

In 2018, there were positive gains in US growth stocks while almost everything else was flat/down; the chart below tells the story. While we expect US GDP and profits to continue to rise in 2019, rising policy rates, unresolved tariff issues, shrinking excess capacity and the prospect of markets having to fend for themselves for the first time in 20 years without central bank intervention are large headwinds. We discussed this in our October piece, and will review it again in our 2019 Outlook, released as usual on January 1st. The biggest binary issue for investors: the long-term US trade and political conflict with China, since I can imagine a substantial market recovery or decline based on how it plays out. Looks like a low single-digit return year in 2019 at best, after flattish returns on diversified stock-bond mixes in 2018.

At this time each year, I depart from standard market and investment commentary to write something different. This year, the Holiday Eye on the Market is a note to my spouse on the 2020 US Presidential election. Please skip this note and read one of the pieces below if politics raises your blood pressure to unacceptable levels. Happy New Year.

Michael Cembalest
J.P. Morgan Asset Management

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