The potential upside in international stock markets will be very close to the two digits if the growth levels indicated in official reports are respected. Although during the year a series of indicators will appear that will give more than one signal to open or undo positions in the financial markets. In any case, next year is very complicated for the interests of small and medium investors who will have to fine-tune their stock proposals to make your operations profitable in the equity markets.
International stock markets start from one of the highest levels in the last five years. With revaluations of 86%, 32% and 22% in the Dow Jones, Eurostoxx and Ibex 35, respectively. Now the question is to know if this trend can be maintained during this exercise or if, on the contrary, the corrections will be installed in the parquet floors. In any case, there will be very reliable parameters that will determine its evolution over the next twelve months. Do you want to know which ones are the most important?
In any of the cases, it will be very important that in this new year they impose on you as an investment strategy the preservation of your capital invested over and above other technical considerations and perhaps fundamentally as well. You should open up to new financial assets if you don't want to lag behind other investors. Because of course there are lives beyond the stock market and there are the markets for precious metals, raw materials or alternative investment to demonstrate this trend that can be imposed during the next year that is about to start.
Keys: global economic growth
The forecasts for this year will be one of the engines that encourages or retracts the evolution of the stock market, depending on the corrections that are made in the coming months. In this sense, the latest report of the International Monetary Fund (IMF) has raised its world growth projection to 3,7%. While from the Organization for Economic Cooperation and Development it maintains the same growth line for the international economy. Although pointing out that the recovery is not strong enough.
On the other hand, the department of analysis of Bankinter it warns that the economy is immersed in a growth phase that could be prolonged. Faced with this scenario, they are in favor of equities as the most profitable investment instrument. Specifically, they set the Ibex 35 target at around 11.000 points, 9% above current levels. Although of course there are many doubts that have to be cleared from now on. Especially those that are destined for the countries of the euro zone. In any case, it will be a very complex stock market course, much more than in previous years.
Business expectations
The results presented by the listed companies every quarter will be a parameter of vital importance to assess the price of the shares. In the absence of the fourth quarter results, the business benefits listed on the Ibex 35 grew in 2018 by around 13%. With a slowdown compared to the first quarter where economic activity rose to 20%. However, one of the concerns of investors lies in how the effect of the Catalan problem will be transferred to the accounts of companies in the coming months. To the extent that it will be one of the keys to condition the path that the selective index will take.
In any case, the first signs are already showing about a certain slowdown in the Spanish economy and by extension in the international ones. To the point that it can generate that the profits of the companies are less than in these years. And this can be transferred to the price of the shares being corrected to a greater or lesser degree. A factor that can cause international stock markets to decrease significantly. This is one of the risks you expose yourself to if you are going to opt for equities in the coming months. It may be the right time to modify your investment portfolio. Both in the stock market and in other financial products, such as investment funds.
Reduction of monetary stimuli
Monetary policy on both sides of the Atlantic is one of the keys to the evolution of the stock market in 2019. However, they show certain divergences between the two economic zones. On the one hand, the United States Federal Reserve has decided to end the year with interest rates above 1%, after raising them by a quarter of a point. This is the fourth increase in the price of money since he changed his economic strategy. For this new year, it is expected that the process of stimulus withdrawal, although it will be gradual as the Fed insists. This decision has not been an excuse for the Dow Jones to have risen 25% in the last year and has settled at all-time highs.
In the European Union, on the contrary, the picture is a little different as we continue with the price of money at a minimum, at 0%. Starting in January, the European Central Bank will cut by half the purchase of public and private debt that was launched to boost the economic recovery in the euro area. Providing that the European stock markets have appreciated almost 30% in the last five years. However, in 2019 there will be a new scenario due to the intentions of the European regulatory body to stop stimulating the financial markets. News that is not well received by small and medium investors.
Oil price evolution
Another focus where attention should be paid is on the crude prices. Any significant upward or downward deviation will generate sudden changes in the prices of the stock indices. In the first of the scenarios because it will create inflationary tensions in the main international economies. While if it trades below $ 40 - as it happened a year and a half ago - it would create distortions in the countries most closely linked to this financial asset. In any case, the average price per barrel is around 65 dollars, with an annual increase of 24%. Forecasts point to crude oil rising about 10% this year, according to the latest Goldman Sachs report.
The outlook for this new year is that the black gold trend is bullish again. This is something that can penalize a good part of the financial markets. Although on the contrary, it may be a good time to take positions in listed companies linked to this important financial asset. On the other hand, it is a fact that you can harm the economy in the world grow in the same way as until now. This is another risk associated with the entry of the new year, as a large number of financial analysts admit.
Elections in Italy and in Germany?
The political factor will also be decisive for equities to take one path or another in the coming months. In this sense, the elections that may take place in Italy in the next twelve months will be of great importance. It cannot be forgotten that the transalpine country is the third largest economy in the European Union, only behind Germany and France. And the eighth in the world with a Gross Domestic Product of $ 1.850.735. Any result that generates more instability to form a government will have repercussions in the financial markets, and especially in the stock market.
On the other hand, the stock market will be pending negotiations between the two majority parties (CDU and SPD) to remain in government in Germany. Because otherwise it would be doomed to a new election in the spring. With a signal of instability in the financial markets because the most urgent issues within the EU could be paralyzed. This feeling is shyly picked up by the German DAX that has been left almost 1% in its price during the last month. To which must be added the strength of the parties known as populists.
Withdrawal of aid in the EU
Another factor of special relevance is that which refers to the withdrawal of stimuli in the European Union and which will take place this year. This fact may be a low hit to the bag since the short positions can be clearly imposed on the buyers. In any case, it will be another factor that will have to be counted on for next year and not precisely under a lesser intensity with regard to the valuation in the price of the shares.
Not surprisingly, it will be a lot of money that moves away from the stock markets to seek other business opportunities. Both in fixed income and in that considered as an alternative investment. To the point that it can mark the evolution of the stock market in 2019. News that is not well received by small and medium investors.