Investment Risks for 2019

By www.ProfitableInvestingTips.com

The stock market has been volatile and
ended 2018 badly as the worst year in the
last ten.
http://profitableinvestingtips.com/bond-investing/investment-risks-for-2019

Has the market gotten the jitters out of
its system or is more trouble in store?

What are the investment risks for 2019
and how can you prepare your
investment portfolio?

The trade war will continue and get
worse.
Interest rates will rise excessively due to
the Federal Reserve.

The global and U.S. economy will slow
down.
As a result the stock market will
continue to be volatile and experience
losses.

Investment Risks for 2019 from
the Trade War

The deficit that the USA runs with China
and the world in general is not
supportable.

As such something needs to be done to
staunch the monetary bleeding from the
US treasury and pocketbooks.

Likewise, the steady loss of US intellectual
property and technical secrets cannot go
on without the USA losing its dominant
position in the world power structure.

Thus the USA should not give in easily in
order to resolve trade negotiations with
China.

A few months ago we looked at what
happens to your investments if the trade
war becomes permanent.

As we noted in that article, China wants
to move to a more dominant and secure
position on the world stage.

They have bitter memories of having
been forced “inward” during the period
of European colonial expansion.

And, the Chinese Communist Party
intends to stay in power, for which they
will need to maintain economic growth
and social stability.

The key to this situation is that neither
side wants to give way.

As such the trade war may be protracted
and economically damaging.

This is one of the distinct investment risks
for 2019 and beyond.

A slower global economy with effects on
both China and the USA could damage
investment prospects across the board.

Investment Risks for 2019 from a
Too-aggressive Federal Reserve

When the markets tanked in 2008 and
2009 the USA and the world were on the
brink of another Great Depression.

Two of the measures that saved the day
were instituted by the U.S. Federal
Reserve.

First of all they dropped interest rates to
almost nothing.

Second, they instituted quantitative
easing in which the Fed purchased U.S.
Treasuries and corporate bonds with their
own funds.

This was equivalent to printing money
and served to inject funds back into the
financial system to replace part of the $7
Trillion or so in value that was lost in the
real estate and stock market crashes.

Back when we wrote the article there was
concern about the Fed tapering off their
quantitative easing campaign too quickly.

They are, in fact, steadily reducing the
size of their bond and treasury portfolio
by letting the bonds expire.

And, the Fed has been slowly but steadily
bringing interest rates back up to more
normal levels as justified by economic
growth.

The concern for 2019 is that the Fed will
be too aggressive and with an extra rate
increase or two cause a recession.

We recently looked at how higher
interest rates will affect your
investments. The affect will be three fold.

First, the value of your bonds and
treasuries will go down as rates go up.

Second, you will gain a higher interest
rate on bonds and treasuries in the
future.

Third, the steadily increasing cost of
servicing the huge American debt will
choke off
investment, infrastructure improvements
, and the US economy.

Investment Risks for 2019 from
an Economic Slowdown

The driver of the stock market for the last
decade has been continually impressive
earnings.

But, how can earnings continue to go up
when people start saving their money
instead of spending it.

We just saw how the market reacted to
Apple announcing that iPhone sales are
slipping in China.

Intrinsic stock value is dependent on
forward-looking earnings.

Whether it is Apple selling iPhones or the
Chinese industrial complex churning out
products for the world, the production of
products needs to match the size of the
market.

And the ability of the market to pay for
these products need to keep up.

Otherwise, prices or production need to
fall.

This is why markets tend to have boom
and bust cycles.

Other factors like the trade war and
interest rates aside, investment risks for
2019 include an aging bull market and
economic boom in need of a reset.

Risks Associated with a Volatile
and Falling Stock Market

There will be two risks this coming year
associated with both volatility and a
falling market.

One is that if you don’t get out of
investments soon enough you will lose a
lot of money.

The other is that if you get out of good
long term value investments as the
market falls and do not get back in, you
will miss out on long term profits as the
market recovers!

Three Stock Market Perspectives

Preparing Your Investments for
the Storm in 2019

If you are a true long term value investor
who looks only at the big picture, you
may simply choose to ignore what you
consider to be the static of a volatile and
falling market in 2019.

You will continue to use fundamental
analysis in picking and tracking your
investments.

The only investments that you will sell
will be those that do not promise profits
over the long term and not necessarily
those with weak prospects in the short
term.

Market jitters, interest rate concern, and
the normal ebb and flow of markets are
generally not a concern for a true long
term investor.

But, long term mega-trends are real and
should be considered.

This where the trade war is not just a
short term issue.

Rather it is a symptom of a global power
struggle that will last a long, long time.

To the extent that the USA and China, or
the USA and Russia, can come to
amicable terms, compete without
working to wreck long term damage on
the other, the current trade war and
other such issues will be temporary.

To the extent, that the major powers see
this as an existential struggle for survival,
it will redraw the economic, political, and
military map of the world and that will
not be good long term investing or
prosperity.

Coca Cola

Investment Risks for 2019

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