Skip to Content

An economy in transition: UMB Investment Management’s Q4 2018 economic and market overview

The stock market, a leading indicator, sent a strong message in the fourth quarter that the economy was in transition.






From Oct. 3 to Dec. 24, the S&P 500 declined 20% historically, signaling a looming recession. In addition, the Federal Reserve suggested that short-term interest rates will continue to move higher. However, the economic data merely implied a slowdown in GDP, nothing close to a recession.

Synchronized Global Slowdown

Last year, the theme was synchronized global growth. Virtually every economy around the world was expanding. In the fourth quarter, the transition started, moving to a synchronized global slowdown theme. The manufacturing data provides confirmation. From late 2016 to late 2018, global manufacturing data supported robust economic growth. Current data points to moderate growth of approximately 2% GDP. In the U.S., the manufacturing data has rolled over. However, economic variables cannot be viewed mutually exclusively. In past cycles, prior to a recession, declining

manufacturing data is confirmed by the non-manufacturing data, or service data. Today, the non-manufacturing data does not confirm an oncoming recession. Instead, the data supports our forecast of moderate economic growth.

Confidence

Just a quarter ago, consumer confidence was close to an all-time high. The drivers of confidence can be: the labor market, interest rates, stock prices, home prices and energy costs. Confidence data transitioned sharply in the quarter, declining due to significant volatility of stock prices and the threat of higher interest rates. Yet the confidence level remains elevated, suggesting consumption growth will continue. Given the Fed’s tactical pause on short-term interest rates and the rebound in stock prices through January, confidence should rebound as well.

Trade Negotiations – Some progress being made

Last quarter, we wrote about the implications of trade tensions. Unfortunately, the narrative continues. Trade tension between the U.S. and China is putting pressure on growth in both countries. If tariffs remain in place, and perhaps increase, inflation will challenge businesses and the consumer. We do expect some type of resolution in the first half of 2019; however, this remains a significant risk to our forecasts.

Outlook

We expect GDP growth of 2.5% in Q4 and 2.9% for 2018. We expect GDP to slow somewhat to 2.0% – 2.4% in 2019. The government shutdown, which began late in 4Q, could also strain fragile economic growth. The longer the government is closed, the larger the impact.

We expect the Fed to increase rates to at least 2.75% in 2019. Corporate earnings should see positive growth and we expect stock prices up 8-12% in 2019.

For more data and analysis, download and read our full report here.

SECURITIES AND INSURANCE PRODUCTS ARE:
NOT FDIC INSURED • NO BANK GUARANTEE • NOT A DEPOSIT • NOT INSURED BY ANY GOVERNMENT AGENCY • MAY LOSE VALUE

To stay informed of the latest market trends, sign-up to receive economic updates and follow UMB‡ and KC Mathews‡ on LinkedIn.

Interested in learning more about our Private Wealth Management division? See what we mean when we say, “Your story. Our focus.graphic line break

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

DISCLOSURE AND IMPORTANT CONSIDERATIONS
UMB Investment Management is a division within UMB Bank, n.a. that manages active portfolios for employee benefit plans, endowments and foundations, fiduciary accounts and individuals.

UMB Financial Services, Inc.* is a wholly owned subsidiary of UMB Financial Corporation and an affiliate of UMB Bank, n.a. UMB Bank, n.a., is a subsidiary of UMB Financial Corporation. This report is provided for informational purposes only and contains no investment advice or recommendations to buy or sell any specific securities.

Statements in this report are based on the opinions of UMB Investment Management and the information available at the time this report was published. All opinions represent UMB Investment Management’s judgments as of the date of this report and are subject to change at any time without notice. You should not use this report as a substitute for your own judgment, and you should consult professional advisors before making any tax, legal, financial planning or investment decisions. This report contains no investment recommendations and you should not interpret the statements in this report as investment, tax, legal, or financial planning advice.

UMB Investment Management obtained information used in this report from third-party sources it believes to be reliable, but this information is not necessarily comprehensive and UMB Investment Management does not guarantee that it is accurate. All investments involve risk, including the possible loss of principal. Past performance is no guarantee of future results. Neither UMB Investment Management nor its affiliates, directors, officers, employees or agents accepts any liability for any loss or damage arising out of your use of all or any part of this report. “UMB” – Reg. U.S. Pat. & Tm. Off. Copyright © 2018. UMB Financial Corporation. All Rights Reserved.

* Securities offered through UMB Financial Services, Inc. Member FINRA, SIPC or the Investment Banking Division of UMB Bank, n.a. Insurance products offered through UMB Insurance Inc. You may not have an account with all of these entities. Contact your UMB representative if you have any questions

271 / 336

Leave a Reply

Required fields are marked

Currently you have JavaScript disabled. In order to post comments, please make sure JavaScript and Cookies are enabled, and reload the page. Click here for instructions on how to enable JavaScript in your browser.

When you click links marked with the “‡” symbol, you will leave UMB’s Web site and go to Web sites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other Web sites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.