Stocks saw a huge reversal on Monday as investors are trying to sort out which of the litany of market factors will have the biggest impact on their portfolios in 2019. Fears of slowing global economic growth, a hiking Fed and peak earnings have all weighed on Wall Street in recent months, putting the S&P 500 on track for its worst annual performance since 2008. Four experts weigh in on what they'll be keeping an eye on as a volatile 2018 draws to a close.
· Tudor Investment founder Paul Tudor Jones says he is feeling good about the markets in 2019 and willing to make a bullish bet on the back of buybacks and deleveraged stocks. "I can't imagine at some time next year we won't be up ... 10 or 15 percent on the year," says Jones, "because we still have the same buybacks we had this past year. The difference is, we're walking in completely and totally deleveraged." Even recently, buybacks have been a boon for stocks under pressure. Facebook's $9 billion in additional buybacks has the stock up more than 2 percent since they were announced on Friday.
· J.P. Morgan's Joyce Chang leans bearish, pointing out that "geopolitical noise" has draped a veil of uncertainty over the markets — and it's not going anywhere anytime soon. "You've got a combination of geopolitical risk and market liquidity concerns that are really weighing on the market right now," says Chang. In her view, U.S.-China trade talks and Brexit are the most important things to watch going forward, with questions regarding their resolutions still far from being answered. If these questions are answered, it could be big news for the bulls in 2019. With more geopolitical certainty, growth might be in good shape for next year. "It's not the growth story or the fundamentals," says Chang about what the market needs. "It's — right now — confidence that the market is looking for."
· Shawn Matthews of Hondius Capital Management identifies two key factors for a positive 2019 outlook. "The two things that have to really happen for the economy to do well and certainly for the equity market to do well [are] productivity has to go up or the perception of productivity has to go up — that has to be a story that continues — and credit spreads have to normalize here at some point," says Matthews. His rationale is that people have to feel comfortable getting back into the market. If not, it could be another volatile year. "I think there are going to be tradeable rallies here and there, but certainly the theme is in place for the next year or two," says Matthews.
· Baird's Bruce Bittles says a recession might be on the horizon for some of the world's markets, but not the U.S. "The fact that Germany is down 20 percent, China is down 20 percent, and now the U.S. has joined the downturn also, that's what suggests to us that the global economy is in recession or on the verge of recession. The U.S. we don't think is going to enter recession. We think there's going to be a slowdown here, but that's going to influence corporate profits to a certain extent." More than any one indicator, Bittles points to volatility as something that could remain high going into 2019, with the negative sentiment of downward momentum another obstacle to a turnaround.