If you’re an investor or an entrepreneur, you know that predictions are just that: predictions. Sometimes they’re right, and sometimes they’re wrong. The best you can hope for is that you average more correct predictions than incorrect ones.
With that in mind, there are a lot of financial predictions in 2019 that didn’t come true. Some might still come true in the future. But for others, the ship may have already sailed.
Let’s take a look.
Prediction #1: Complete Market Crash or Economic Recession
This prediction is almost a little unfair to cite. Analysts and experts have almost universally been predicting a market crash for the last few years, and yet the economy keeps on trucking. In early 2019, the market was so incredibly volatile that people were calling for a crash practically every day. But it stabilized and moved forward, and (to some extent) greater levels of volatility became the new normal.
Why isn’t a market crash happening?
Well, it’s complicated. For one, we’ve gotten better at detecting recessions and mitigating them, and recessions and depressions are usually what drives crashes. While there are key indicators that a market crash should be happening, we’ve changed the way that we adjust to them, buffering the market preemptively with things like quantitative tightening. And while it was expected that the Fed would ease up on its bond portfolio, it’s actually continued growing.
Further, the market has become more complex, on a global scale. Indicators that worked ten years ago may not work today, which leaves us slightly adrift in terms of predicting major market events. We know that the situation is unstable and that continuous growth is unsustainable, but despite that, the market hasn’t reacted to or adjusted to the issues that we can see.
Prediction #2: Rates Will Go Up
This was a big one that many people got wrong: the Federal Reserve cut rates instead, dramatically. This is part of what could be propping up the economy now, can be seen as a high risk measure because it encourages spending and debt. However, when used strategically, rate cuts can also keep money moving and stave off issues such as recession.
It’s a good time for borrowing, both for individual consumers and business owners. But that also means that there could be a tightening down the line, and those market forces could put pressure on the economy.
Prediction #3: Existing Home Sales Will Decline
Millennials haven’t been buying homes: That’s been in the headlines for years. But while it was expected that existing home sales would decline throughout 2019, it actually reached a 17-month high in August.
While purchasing a home has become more expensive, the rate cuts have contributed to an increase in borrowing. People are still purchasing homes, especially in areas of high employment, as it’s often more economically feasible than long-term renting. “Millennials” are now approaching their 40s and are finally in the position to buy.
During times of economic stability, people to tend to purchase homes. And while home prices have been rising dramatically in the United States, it still doesn’t approach the prices of areas such as Canada and Australia, where average homes can top $1 million in many areas. That being said, there are likely to be fewer new homes built, and the large “McMansions” of yesterday aren’t being snapped up. Small, modest starter homes are more likely to be purchased.
So, the 2019 year in review: It could have been a disaster, but it wasn’t. While a recession seemed to be looming, it’s been staved off for now. Unfortunately, many of the measures that have been taken to reduce the chances of a recession may be temporary at best. The Fed can’t keep buying up bonds and lowering rates for the illusion of stability, so unless another major change occurs in the market, the can has just been kicked down the road.