The 2018 calendar year was a "year on steroids."
That's according to LendingTree's Chief Economist Tendayi Kapfidze. And while 2019 economic growth may still be strong, it'll be hard to match the growth seen in 2018, which largely benefited President Trump's tax cuts. "When people talk about a slowdown in 2019, it's really relative to 2018," Kapfidze said. John Lynch, Chief Investment Strategist for LPL Financial agrees. "The U.S. economy will continue to benefit from tax reform, even though growth may slow from the near 4% pace of the past two quarters to around 3% in the near term," Lynch said.
Here are some key issues as investors prepare for 2019:
The unemployment rate is 3.7%, a very strong rate historically. While there have been a few years that saw the rate dip below 2%, those were mostly war-time years, especially in the 1940's. "It's difficult for the rate to go much lower than it is right now," said Kapfidze. And maybe there will be a slow down in job growth, but it could still remain healthy because companies are still looking for workers.
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Earnings Growth and Cash
Earnings growth is expected to come out to be roughly 26% in the third-quarter, but should slow in 2019. First-quarter earnings growth is expected to be roughly 9%. That will impact cash on hand. "I think corporate balance sheets will stay healthy," Kapfidze added. That fuels demand for workers. "The demand side is also pretty strong," KapfidZe said, meaning that companies are still flush with cash, coming off of a year of tax cuts, and may be ready to hire. The hiring ultimately depends on the growth of business investment. As businesses invest, they need the workers to boost production.