The S&P 500 stock index will see limited gains in the remaining months of 2019 as anxiety over slowing global growth and the US-China trade war weigh against expectations of monetary policy easing, according to a Reuters poll of strategists.
The US benchmark index will likely finish 2019 at 2,925, nearly 2% higher than Tuesday's close, based on the median forecast of 47 strategists polled by Reuters in the last two weeks. This would represent an almost 17% jump from the end of 2018.
The targets were little changed from a Reuters poll in May.
Most respondents still viewed global monetary policy easing as a net positive for equities, but a majority said the risk to their market expectations was skewed to the downside.
"You have slow global growth. You've got a yield curve inversion. You've got a lot of uncertainty around trade tariff policy and a Federal Reserve that, by all accounts, is probably behind the curve right now, cutting too slow, based on financial conditions," said Darrell Cronk, chief investment officer for Wells Fargo Wealth and Investment Management in New York.
Cronk expects the current bull market to continue into 2021 as US consumer spending remains strong and corporate earnings grow, albeit at a much slower pace than in 2018.
But the U.S-China trade war looms large as a key risk to bullish targets for the market. Strategists are concerned that higher prices resulting from tariffs could result in slower global trade and a weakening international economy.
"The risk to our rosy view has clearly risen," said Hank Smith, chairperson of the investment selection committee at Haverford Trust co in Randor, Pennsylvania, adding, "Trump may think China-bashing is a winning issue" for the 2020 US presidential election or that China may not be willing to negotiate due to the possibility that Trump may not get re-elected.
While the S&P's close on Tuesday showed a year-to-date gain of 14.45% and was roughly 5% below its record close on July 26, daily volatility since then has often been attributed to dramatic changes in the tone of US President Donald Trump's comments about the trade war.
"Very much depends on how long disruptive trade policies continue. If they go on much longer, the effects will be longer term and it might be too late to reverse them due to lost trust with trade partners," said Bryant Evans, investment advisor at Cozad Asset Management in Champaign, Illinois.
The poll showed the Dow finishing 2019 at 26,007, according to the median forecast of 26 strategists. That's up just 1% from Tuesday's close and an advance of 11.5% from the end of 2018.