The State of Investing: Outlook for 2019

Estimated read time: 4 minutes

If we had a crystal ball, we would never have to worry about money again. We'd know exactly which investments to snatch up and which to avoid.

While we may not be able to help you land that crystal ball, we can look to signs and indications to figure out what investors can expect this year and in the near future. If you are going to be investing money this year or in the next few years, this can help you get started.

2019 State of Investing Overview

Things were looking rather bleak at the end of 2018. The market had taken enough hits that it seemed poised to enter a bear market, but January roared back, having its best performance for that time of year in more than two decades. That helped calm investors' fears about an imminent bear market.

Bear markets are enough to strike fear into many investors' hearts because it means the potential for losing a lot of money. But keep in mind, bear markets are also full of opportunities for savvy investors. If you have the funds available, you can buy some great stocks at cheap prices. That can net you a small fortune years down the road. So for the long-term investor, bear markets aren't always a bad thing — there are profits to be made.

That's something to remember because we're not out of the woods yet about the possibility of a bear market in 2019. There are a couple of steps you can take to minimize how badly a bear market would hurt you.

  1. Diversify your holdings:
    Make sure you aren't holding too much of your portfolio in stocks or in any one sector.
  2. Don't panic:
    Remember, you're in this for the long term. So avoid selling everything if a bear market hits. Instead, hold steady and think of the cheap stocks as a way to buy them on sale.

Where To Invest

The hardest part of being an investor is knowing where to put your money and when. There's a lot of guesswork involved, but being informed has its rewards. A well-informed decision is always better than a shot in the dark.

To thrive in 2019 and beyond in case of a market downturn, if you're heavy on stocks, add in some bonds, depending upon your age. The closer to retirement you are, the more you should hold in bonds in your retirement fund. That will prevent you from losing a large portion of your fund and not having enough years to reverse the damage that's been done.

When it comes to stocks, own a mix of foreign, large cap, and small cap stocks. You may want to steer clear of airline stocks because the airline industry can be particularly vulnerable to recessions.

Two investments you might want to consider are Amazon and NVIDIA. Amazon has had some amazing returns the past few years. It is well known for its great leadership and reaching levels of success most companies only dream about. NVIDIA has posted some big losses in the past few months, but with both short-term and long-term innovations on the horizon for this company, it could still be a solid pick.

Other good bets include:

Alibaba
Celgene
Computer Programs and Systems
Johnson & Johnson
DowDuPont
Facebook
Starbucks Corporation
Berkshire Hathaway
Apple
Sprouts Farmers Market Inc.

Recession Wire: What to Expect?

With the Great Recession of 2007 to 2009 still fresh in many investor's minds, it's no wonder the mere mention of the word is enough to cause heart palpitations. Because the economy was so slow to come back from the Great Recession, it has made an imminent recession more possible. Any slight hiccup can hurt an already fragile economy, putting it into a tailspin.

Will we see a recession in 2019? Possibly — although the chances of it happening that soon are still fairly low. A stronger possibility is a recession in 2020.

One of the signs that could mean an upcoming recession include a much slower construction spending rate. Before many of the downturns in the U.S. economy, reduced construction spending has been seen.

Another factor that has the ability to stall any growth this year is how often and high the Federal Reserve increases rates. A monetary policy error can do more than just halt growth — it can throw the country into a recession.

Other possibilities, or a combination of them, may also be the cause of the next U.S. recession, including oil price shocks, trade wars between leaders, and even foreign recessions that do damage to our economy.

Regardless of whether it hits in 2019 or a couple years later than that, it's inevitable at some point. Investors can't prevent a recession — we just have to safeguard ourselves with smart choices.

Millennials, Gen Z, and Social Responsibility

An important shift in traditional thinking is also worth noting when talking about investing in 2019 and beyond.

While keeping an eye on their bottom lines, Millennials and Gen Zers have also shown an interest in the environmental and social aspects of investing. They don't appear to be strictly driven by a need for profits.

They want to support companies that do more good than harm, and they tend to boycott companies that are known for greed, abusing power, harming the environment, and allowing or promoting sexism, racism, and ageism. It can also mean boycotting industries that don't align with the investors' ideals, such as shunning tobacco and weapons manufacturing companies.

ESG criteria, which stands for environmental, social, and corporate governance, can help investors find companies they're proud to back. To help identify which companies are ethically sound, you can work with an investment firm, use a robo advisor, or do your own research.

Holding Steady

Whether we dodge a recession in 2019 or get hit hard by one, keep in mind one is likely right around the corner. The U.S. often has one or two recessions every decade, so being prepared for one is the smart thing to do.

While you may still be hit by it when it happens, you can avoid being completely blindsided by taking precautions to diversify, buying stocks when they can be snatched up cheaply, and increasing your fixed-income assets. That may even mean investing with a bank to find competitive rates on guaranteed interest vehicles.