Stock Market Outlook 2019

Consensus Views Or Contrary Swans

Funny thing about consensus vs. contrary views – they are often identical if you believe what you read. “Wall of worry” and “Slope of Hope”: it’s all irrelevant if you are wearing blinders and have no mooring, or any basis for what the facts are.

Add to all that the fact that most opinions are paid advertisements, mainly for sell-side firms, and it’s tough to wade through the B.S. As per usual, according to a survey from CNBC, the S&P 500 will reach 3000 by the end of 2019.

According to my own non-scientific survey this is the 20th consecutive year that such surveys predict a gain in the market. A prediction for the coming or current year is almost always positive. The negative predictions are saved for “next year” (in other words later in 2020 as seen from in early 2019). Then, of course, the predictions change, and turn positive, just before the year turns.

Such nonsense goes even deeper while pundits and hacks will cite “pervasive pessimism” in the face of almost total bullishness to claim to have a “contrary” view while in reality herding like Spanish bulls in springtime.

“It’s tough to make predictions, especially about the future”

Yogi Berra

Using actual data such as the Put-Call Ratio, VIX, AAII Sentiment Survey, or, for example, levels of margin debt and mutual fund money flows, can at least give a picture of the state against which one intends to be contrary.

Then, once in a while, in full-on Black Swan fashion, the prevailing “wisdom” blows up and everyone declares shock that such a thing could happen. A recent example of this was the disastrous collapse of the “short vol” trade in February of 2018.

A one-eyed man in the land of the blind can see a bit more than the rest. A first step is to be aware of the hype and see past the herd. In the last 100 years, Bull markets have tended to last longer than Bear markets (which move faster) and that alone leads to a bias toward a false idea that investing in stocks can lead to a steady, constant gain profile.

To sum up our outlook for 2019 in terms of end of year projections, the word “grim” comes to mind. Bear Markets follow Bull Markets, Raising Rates pop bubbles, the 2008 excess was never dealt with, and on and on and on. Clearly, the most bullish possible prediction anyone looking at facts could possibly make is that the next down phase in the market might come a bit later (2020 anyone?) rather than sooner.

Naturally, that is exactly what the “pessimistic” pundits are predicting. Far from pessimistic in reality, this is the most wildly optimistic, bullish possible take on the current juncture imaginable. Perfect for the true contrarian outlook which points toward a real Bear Market, sooner rather than later.

This is not to say that it looks like all gloom and doom for the coming year(s). There are exciting changes afoot, particularly in media and digital communication, and, as with all times of great change, the aftermath of the coming storm points toward a cleansing and realignment of world economies and cultures. Bring it on…….

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