Is the bull market over or nearly done? That’s the big question facing investors and advisors on these last days of the year.

It was always just lurking under the surface of market outlooks that for the first time in a long time mentioned recession, not as a likelihood but as a concern that could grow if not for 2019 then for 2020.

Then the last Federal Open Market Committee meeting of the year took place and the bear looked more ready than it has in nearly 10 years to end its hibernation. The day after the FOMC meeting, Dec. 20, the Nasdaq finished 19.5% below its high for this cycle and fell into bear-market territory the next session. The Dow Jones industrial average and S&P 500 were off about 15% from their cycle highs.

“The stresses evident in markets indicate that the equity correction has further to run in both time and possibly price, consistent with the history of past 10%-plus post [financial crisis] corrections,” wrote Julian Emanuel, chief equity and derivatives strategist at BTIG, and his colleague Michael Chu, an associate equity strategist, in a note.

“A lack of progress on the China trade war front increases the probability that the correction could morph into a bear market in 1Q, even without a recession on the horizon, similar to 1998.”

That bear market lasted only about two months.

On the flip side, many strategists expect 2020 will be a positive, though volatile, year for the U.S. stock market, with modest gains.

“We don’t think the bull market is over, but we do believe we’re in the beginning stages of the ending process,” writes Christopher Hyzy, chief investment officer for Merrill Lynch and U.S. Trust. “We expect U.S. gross domestic product growth of around 2.5% in 2019, and for equity markets to rise about 5% from their year-end levels, in line with growth in corporate earnings.”

Charles Lemonides, portfolio manager at Valueworks LLC, is more optimistic. He says 2019 “could be a really positive year for equities” because the economy can continue to expand, adding roughly 200,000 jobs a month. “It takes a lot to turn that around and change direction.”

But there is confusion in the market, as highlighted by the stock market’s reaction to the Fed’s last meeting of the year, which makes for a shaky outlook for next year.

After the Federal Reserve announced it was raising interest rates 25 basis points, as expected, and lowering expectations for rate hikes next year to two from three previously, U.S. stocks sank. The Dow was down as much as 513 points while Fed Chairman Jerome Powell spoke at his press conference and, along with the S&P 500, finished 1.5% lower, down more than 2,200 points for the month to date.

Previously the stock market had welcomed signs of fewer-than-expected rate increases, but this time it seemed disappointed that the central bank was planned on raising rates at all despite the fact that most Wall Street strategists have been forecasting between two and four hikes next year.

Some commentators blamed the market plunge on Powell’s comments that the Fed’s unwinding of its quantitative easing assets was set to autopilot because it is essentially another mode of a tightening. Others mentioned the lack of a specific reference to the volatile stock market.

“No Fed chair can ever say ‘Winter is coming,’“ wrote Nicholas Colas, co-founder of DataTrek Research. “He must take the other side of the current bearish trade in stocks and bonds. To do otherwise would only hasten an economic slowdown as companies and individuals followed the Fed’s lead.”

Jeffrey Saut, chief investment strategist of Raymond James & Associates, wrote in his morning  note the day after the Fed meeting that “with the exception of Volcker’s October 1979 surprise (after an emergency FOMC meeting),” he could not recall a time “when the Street was positioned so wrongly against an FOMC announcement.” Saut was referring to the former Fed chair’s announcement of a change in policy from managing the daily federal funds rate level to managing the volume of bank reserves in the system in order to restrain inflation.

Most strategists agree that the bull market, in its 10th year, is in its late cycle — Russell Investments calls it the ‘late-late cycle show — but not ending yet. “The end of the cycle is getting closer … Bear markets don’t normally start until around six months before a recession, so equity markets still have some potential upside. Monitoring recession risks will be critical … to avoid buying a dip that turns into a prolonged slide.”

Russell Investments, like many other asset management and analytical firms, does not expect a U.S. recession will start before 2020, but its analysts are concerned about the continuing trade war with China, which could escalate and have an even larger impact on corporate sales and supply chains than it currently has. (FedEx slashed its 2019 earnings forecast, citing a weakening European economy and further slowdown in China due to U.S.-China trade tensions.)

UBS strategists “see profit growth in the U.S. market, which comprises more than half of the global equity market, falling off to roughly 4% in 2019 from an eight-year high of 21% in 2018. The one-off boost from corporate tax cuts will not be repeated, and tariffs will begin to have a negative impact.”

“The path of the market next year will depend on investor perception of the longevity of the current economic expansion,” according to analyst at Goldman Sachs Investment Research.

In the meantime, many  strategists are favoring emerging market stocks over U.S. stocks but within the U.S. they recommend high-quality shares.

“Quality has historically outperformed other equity style factors in economic slowdowns” and can offer balance to portfolios, according to BlackRock’s analysis. BlackRock defines quality stock as having a strong cash flow, sustainable growth and clean balance sheets.

Some strategists are favoring value over growth because they are relatively cheap compared to growth, with P/E multiples near 2002 lows, according to UBS.

“Fundamentals are mattering again and that definitely helps value,” said Robbie Cannon, CEO of Horizon Investments.

Others like Omar Aguilar, chief investment officer, equities at Charles Schwab Investment Management, says there’s no need to rotate out of growth into value stocks but investors should be more selective about growth stocks, de-emphasizing momentum.

“Given expected volatility and a heightened focus on valuations, we expect 2019 to be stock picker’s market,” writes Saira Malik, equity strategist at Nuveen. “You want to know what you own,” stresses Cannon.

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