US stocks will build on this year's already strong gains over the rest of 2019 despite growing US-China trade tensions that represent the biggest threat to the market, according to a Reuters poll of strategists. The benchmark S&P 500 index will finish 2019 at 2,925, up about 4.4% from Tuesday's close, based on the median forecast of 50 strategists polled by Reuters in the last two weeks. It would represent a gain of 16.7% from the end of 2018.
Most strategists in the poll cited further escalation in the US-China trade war as the biggest potential negative over the coming year, followed by a worse-than-expected US economic slowdown and slower earnings growth.
Rising intensity in the trade war is likely the biggest risk since it could affect so many other areas, said Sam Stovall, chief investment strategist at CFRA.
"It could have a cascading effect on the global economy and corporate profit growth, which could cause shares to become overvalued," Stovall said.
The overwhelming majority of strategists in the US poll also said the risk for stocks is skewed more toward the downside than the upside.
Although the S&P 500 remains up about 12% for the year so far, stocks have sold off recently amid persistent worries over the trade battle. The Dow Jones industrial average last week registered its fifth straight week of declines, its longest such losing streak in eight years.
Adding to tensions, Washington effectively banned US firms from doing business with Huawei Technologies Co Ltd, the world's largest telecoms network gear maker, citing national security concerns.
"Companies are getting more worried about the sanctions in the ramp up in this trade war than they are about tariffs," said Anthony Saglimbene, global market strategist at Ameriprise Financial in Troy, Michigan, noting technology companies could be hit the hardest.
Still, strategists were slightly more optimistic about the S&P 500's potential gains in 2019 than they were in a Reuters poll in February, when the median target for the index was 2,900.
Many investors remain hopeful of an eventual trade agreement, and some expect the market to weather the turbulence well.
The S&P 500 index peaked last year on September 20, before sliding nearly 20% over the next three months.
For all of 2019, analysts are forecasting profit growth of just 3.0%, down sharply from 2018's tax-cut fueled earnings growth of 24.1%.
Investors expect tariffs could lift corporate costs and lower profit margins, while continued uncertainty surrounding a trade deal will hinder the ability of companies to plan or make capital expenditures.
The poll also showed the Dow finishing 2019 at 26,000. That would represent a gain of 2.6% from Tuesday's close and an increase of 11.5% percent from the end of 2018.