2019 forecast: Chaos with a chance of progress

What will 2019 look like? Investors (and commentators like me) have no idea. They can’t even explain what happened last week, much less what lies ahead.

But, here’s one thing we can count on: Many of the top news stories destined to move markets and stocks in 2019 will be surprises:

• There will be a breakthrough in Alzheimer’s research;
• President Trump will strike a deal on immigration in which Deferred Action for Childhood Arrivals people are granted legal status in exchange for a wall;
• Bill and Hillary Clinton’s speaking tour will be cancelled; and
• “A Star is Born” will win the Oscar for Best Picture.

{mosads}What else might we expect in 2019? Here are my predictions:

COO Sheryl Sandberg will leave Facebook.

Sandberg may be thrown under the bus by an increasingly beleaguered Mark Zuckerberg, or she may be allowed to resign gracefully, but she will go.

Facebook has had a ghastly 2018, with the stock now down 26 percent from the start of the year and 39 percent off its July high. The company has had to apologize for numerous scandals, including peddling customer data like peanuts and allowing Russian trolls to infiltrate its platform.

Just recently, the New York Times published yet another revelation, reporting that the company had shared user data with 150 big firms like Amazon, Microsoft and Netflix.

That’s not all. Facebook hired a political opposition research firm to investigate billionaire George Soros after he attacked the company, which resulted in charges of anti-Semitism.

Management was also accused of trying to cover up the extent to which Facebook had hosted Russian disinformation. As it happens, Sheryl Sandberg was responsible for both those missteps. 

At some point, angry regulators and politicians will demand a scalp. It won’t be Zuckerberg who takes the fall. That honor will go to Sheryl Sandberg.

England will endure another referendum on EU membership and, this time, “Remainers” will win.

Polling shows the U.K. views the EU more favorably, and the middle-road Brexit deal proposed by Prime Minister Theresa May pleased no one. The decision will infuriate Brexiters and will cost May her job. This time next year, Labour Leader Jeremy Corbyn will be prime minister and Boris Johnson will head the Tory party.

The Federal Reserve will not raise interest rates until late in 2019, if then.

Growth is slowing, inflation is hovering around the Fed’s 2-percent preferred level, and recent declines in oil prices should keep it there, notwithstanding the low unemployment rate.

In late November, Chairman Jay Powell said that rates were “just below” the “neutral” level that will keep the economy on course. Since the Fed hiked rates one quarter of a point after making that remark, presumably he can argue that we have now hit that desirable level.

In November, Powell said, “The best thing we can do is to try to sustain this expansion for as long as possible.” He is correct, and he can do that by holding rates steady.

China will make substantial concessions over the next two months in order to soothe trade tensions, but the White House will not stand down.

At the end of the so-called 90-day truce arranged at the Group of 20 meeting in Argentina, the White House will threaten higher tariffs, causing market turmoil, but ultimately agree to another period of negotiation. Trump will not declare a permanent ceasefire, even as China offers up more sweeteners.

Already, Beijing has reduced tariffs on 700 goods, allowed imports of U.S. rice for the first time ever and renewed soybean purchases. Chinese officials also proposed softening requirements for forced technology transfers.  

Nonetheless, the White House will again threaten to raise tariffs on $200 billion of Chinese imports to 25 percent from their current level of 10 percent. Though President Trump will be wary of doing anything that further slows U.S. economic growth, he and his advisors think they have China on the ropes.  

Bloomberg recently estimated that China’s economy slowed for the seventh straight month in December, relying on indicators such as the purchasing managers’ indices (PMIs). They linked the sluggishness to dampened confidence as well as trade tensions.

The data is so bad that officials have now banned the publication of the PMI data from export hub Guangdong province — never a good sign. 

Chinese President Xi Jinping is coming under increased criticism for his handling of China’s economy. At the same time, his aggressive mercantilist policies have begun to encounter resistance around the world. Though further concessions will have to allow Xi to save face, they will come. Trump will win this encounter.

House Democrats will vote to impeach President Trump, using special counsel Robert Mueller’s report to accuse the president of misconduct.

The Senate will not move to a trial, the next necessary step to oust a sitting president. That stalemate will cause Democrats to push hard not only for the White House in 2020 but also to take control of the Senate.

That road will be tough; while the GOP will be defending more seats than in 2018, most are in friendly territory. Also, they have opportunities to flip some Democrat-held seats, especially the one held by Sen. Doug Jones (D-Ala.).

{mossecondads}The importance of controlling the Senate will skyrocket if Supreme Court Justice Ruth Bader Ginsburg’s health fails. At age 85, her recent bouts with cancer and injuries sustained in a fall would have felled a lesser mortal. Despite her resolve, Ginsberg will eventually retire.

If President Trump wins reelection in 2020, he will almost certainly have the opportunity to nominate another candidate for the court. Most likely, he will pick a female. After the Kavanaugh hearings, of that we can be certain.

What else can we look forward to in 2019? Endless political maneuvering as scores of Democrats vie for a chance to run for the Oval Office, and devastating new nicknames for every contender, courtesy of President Trump. Happy New Year everyone!

Liz Peek is a former partner of major bracket Wall Street firm Wertheim & Company. For 15 years, she has been a columnist for The Fiscal Times, Fox News, the New York Sun and numerous other organizations.