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Can US indexes reach new peaks in 2019?

US indexes

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The US stock indexes are important criteria for the performance of the US economy and in some cases even the global one. The condition of the US stock markets is monitored by most financial institutions and central banks around the world, as well as by many politicians. Proof of this is Donald Trump’s election promise that Dow Jones will reach a record 30,000 points during his presidency, analyzes Economo.

However, just recently, Donald Trump has escalated the trade conflict between the US and China after surprisingly raising imports duties on Chinese goods worth 200 billion USD from 10% to 25%. Of course, China’s response was not delayed, and Beijing responded with reciprocal tariffs on US imports worth 60 billion USD. These moves sparked turbulence in the stock markets and led to a correction after the solid rally since the beginning of the year.

The stock index S&P 500 posted its strongest performance in January for more than 30 years. However, in 2018, the index registers the worst December since 1931 and the worst year after the financial crisis. Thus, many analysts think that the January 2019 rally is just a rebound after over-sales. Nevertheless, the growth of US indexes continued in the coming months, and the S&P 500 and Nasdaq Composite managed to even reach new highs, albeit with only a little.

The strong start of the year and the reversal of the Fed’s policy, which announced it would not raise interest rates during this year (even suggested for possible decreasing them), as well as the positive start of the US-China negotiations, drew a positive picture of the US markets. That lasted until Donald Trump again surprised the markets, saying he would raise the customs tariffs on Chinese imports worth 200 billion USD.

The result was a sharp decline in US markets, with Dow Jones Industrial Average collapsing by more than 600 points on May 13. This was its worst trading session since January 3. Meanwhile, S&P 500 also had its weakest session since the beginning of the year and dropped by 2.4% only within a day.

Dow Jones YTD

At the same time, currency markets saw capital movements from risky currencies to safe-havens such as the Japanese yen, the Swiss franc, and the gold.

But what can we expect from US stock indexes by the end of 2019?

Some analysts are quite positive and expect the US stock markets to reach a new peak by the end of the year by referring to the Fed’s tightening of the monetary policy cycle and the faster-than-expected growth of the US economy in the first quarter.

On the other hand, the bears forecast a drop in markets by the end of the year in 2019. Their arguments are also not negligible as they are based on the continuing US-China trade war, the slowdown in the US economy and the end of the 10-year economic a cycle that began after the end of the major recession in 2008.

The years 2018 was the most volatile year in the financial markets after the global financial crisis. It looks like 2019 will also be very dynamic, which will offer very good trading opportunities for both bulls and bears.