Trader Talk

Art Cashin's predictions for 2019: Fed won't hike and there's an 'outside chance' they cut rates

Key Points
  • UBS' Art Cashin says the Fed may not hike in 2019 and there's an outside chance they may have to cut rates.
  • Brexit will happen and will be more disruptive than what people think, Cashin predicts.
  • He also says President Trump will be a "bit of a problem in the first half" of next year.
  • Cashin called the drop in bitcoin this year.
Cashin's Corner 2018: Annual Chat at Bobby Van's
Cashin's Corner 2018: Annual Chat at Bobby Van's

I sat down with UBS' Art Cashin at the bar at Bobby Van's steakhouse across the street from the NYSE for our annual look back/look ahead.

Art and I both agree that the big story for 2018 was the return of volatility.

Here are Art's thoughts on what's in store for 2019.

On the Federal Reserve and rates:

"I think perhaps the Fed will not hike ever again in 2019. ... If you go back and look at what I said both in our interview and with you time and time again, I have been a bear on yields. I think that the Fed — is somewhat misreading what's going on. Yields are not going much higher and — there's an outside chance that they cut before the end of 2019."

On stocks: expect a bumpier ride

"I think it will be very volatile, and — for the first half — probably flat to down as the Fed and others grapple with what they want to do."

Brexit will happen, but the ramifications have still not been felt:

"Time is running out. They're going to have to make a decision in late spring. I think Brexit will be forced upon them and it will not be comfortable. I think people will be surprised at how disruptive it is."

On tariffs: more or fewer tariffs?

"I think they may walk back from the tariffs that are threatened, but I think the global economy may shrink somewhat. It's already begun to shrink. China's seeing it — its exports go down, but perversely, not with America yet. That's to come. It — the — the exports are going down with Europe. So the global economy is slowing. 2019 is going to be somewhat of a difficult year."

On whether we make a long term deal to settle the trade war with China:

"I don't believe so. I think we will get something that approximates it, and you'll get perhaps in midyear a relaxation rally, but — with — with the problems of — political sequencing, whatever, I don't think it works out."

On global growth: Do we have any clarity on the extent of the slowdown?

"That will be difficult to find, and — and if anything I would think, and I'm not an economist, that instead of 3 percent or better growth, you're probably going to get way back to 1.5 percent or 1.7 percent, and — and things will slow down."

On whether President Trump will be a help or a hindrance to the markets in 2019:

"He will be a bit of a problem in the first half and he will bend over backwards to try to be a big help to it in the second half. Whether that's effective or not, I don't know."

On the chances Congress will pass the new US-Mexico-Canada Agreement:

"I don't know. It's a terrific gamble for them because if it passes, it's not vastly different than NAFTA, so it will keep the economy and the exchanges working well. If the Democrats choose to really fight, it could very disruptive of the biggest trade area in the world."

As for Art's 2018 predictions, I give high marks for his three core predictions:

  1. China could interrupt the synchronized global growth story. RIGHT
  2. The Fed: he risk is that inflation remains too low. HALF RIGHT (inflation moved toward the Fed's target but was still shy)
  3. Bitcoin will not work out the way the bitcoin enthusiasts think it will. RIGHT

Not bad, given how low the accuracy rate of most predictions are.