WalletHub’s Financial Predictions for 2019
Foresight leads to preparedness, and being prepared really pays off when it comes to personal finance. So to help you get ready for the months to come, WalletHub’s editors surveyed a panel of economics experts, analyzed big-bank projections and Federal Reserve forecasts, and produced a list of financial predictions for 2019.
Below, you can check out WalletHub’s projections for everything from GDP growth and stock market gains to credit card debt and credit scores. And that’s followed by additional commentary from our expert panel.
WalletHub’s Financial Predictions for 2019:
- U.S. GDP Growth Will Fall to 2.5%
- Unemployment Will Dip Below 3.5%
- The S&P 500 Will Top 3,000
- The Fed Will Raise Rates Twice, Costing Borrowers Billions
- Credit Card Debt Will Top $1.1 Trillion
- Consumer Credit Scores Will Set Another Record in 2019
- U.S. Auto Sales Will Fall Just Shy of 17M, Breaking the Four-Year Streak
- Existing Home Sales Will Hit 5.5M, Despite Higher Rates
By the way, it’s worth noting this isn’t our first rodeo. Over the past seven years, WalletHub’s annual economic predictions have largely come true, earning an average GPA of 3.6. You can learn more about that below, too.
Financial Predictions for 2019
U.S. GDP Growth Will Fall to 2.5%
The U.S. economy gained steam during 2018, with GDP growth rising from 2.3% in 2017 to a projected 3.1% this year, according to the Federal Reserve. Not all projections are so optimistic, however, either for the end of 2018 or for the new year. For example, Bank of America projects GDP growth of 1.75% for both 2018 (when all is said and done) and 2019. Other big-bank forecasts range from 2.3% to 2.8% GDP growth in 2019.
Overall, we expect GDP growth to fall slightly from 2.8% in 2018 to 2.5% in 2019, based on the projections of 10 large investment banks, the Congressional Budget Office and the Federal Open Markets Committee (FOMC).
However, some of the finance and economics experts we consulted see things a bit differently. “I think the U.S. economy will do fine in 2019,” said Douglas C. Friedman, associate professor of marketing and chair of the Department of Business Management at East Stroudsburg University. “I predict GDP growth of 3%-3.2%.”
On the other hand, Malcolm Robinson, professor and chairperson of Economics at Thomas More University, foresees slower growth. “I expect GDP growth of about 2.1% in the first half of 2019 and somewhat less than that in the second half,” Robinson said. “I believe the labor market constraints I thought would appear in 2018 will begin to come into play in 2019.”
Unemployment Will Dip Below 3.5%
At 3.7% as of November 2018, the national unemployment rate is at the lowest point in 49 years. We can expect unemployment to fall even further in 2019, too. The Federal Reserve projects a 3.5% rate in 2019, as does Wells Fargo. And a pair of economic heavyweights – Goldman Sachs and Bank of America – even expect the unemployment rate to dip all the way to 3.2%.
We’ll go with the average of the forecasts from the investment banks and economists WalletHub surveyed: 3.4% unemployment in 2019. Bottom line, if you don’t have a full-time job, 2019 might be your lucky year because businesses will be hiring.
The S&P 500 Will Top 3,000
We’re near the end of a record bull market. Stocks have posted gains for eight straight years, from 2010 through 2017. But the sailing is far from smooth right now. At 2,546 as of December 17, the S&P 500 is down 5.4% year to date. Hope is not lost, however.
The average investment bank WalletHub surveyed expects the S&P 500 to finish 2019 just above 3,000. Price targets for 2019 range from 2,750 (Morgan Stanley) to 3,350 (Credit Suisse). We’ll go with the midpoint for our forecast.
But be careful. “Predicting the stock market a week away is difficult. Predicting the stock market a year away is a fool's game,” warns Malcolm Robinson of Thomas More University. “The efficient market hypothesis reminds us that there's a lot we don't know about the economy for 2019 and therefore a lot we can't say about stock prices.”
The Fed Will Raise Rates Twice, Costing Borrowers Billions
The Federal Reserve Open Markets Committee has increased its target interest rate, the so-called federal funds rate, eight times since 2006: once in 2015, once in 2016, three times in 2017, and three times so far in 2018 with a fourth expected on Dec. 19. And the Fed’s projections indicate three more rate hikes are most likely in 2019, though several Fed members are calling for either two or four interest rate increases.
Similarly, the experts WalletHub surveyed seem to think we’ll have a two-hike year in 2019. “I expect that the Fed will raise the rate once in its December 2018 meeting (probably by 0.25%) and maybe once or twice at a maximum next year by another 0.25% each time,” said Martina K. Schmidt, an instructor of finance at the University of South Florida, St. Petersburg. “The Fed has to be very cautious with its monetary policy. If it raises the target rate too much too quickly, it might have a negative effect on equity markets and slow down the overall economy as well as the already slowing real estate markets.”
If the odds and the experts indicate two to three more rate hikes in 2019, that’s what we need to plan for. And that means paying off as much of our record credit card debt as possible. If we don’t (the more likely scenario, unfortunately), we could be in big trouble. Each quarter-point increase in the Fed’s target rate costs people with credit card debt roughly $1.6 billion in extra interest per year, according to WalletHub research. And delinquency rates are creeping up from record lows as debt levels reach record highs. Further Fed rate hikes could be the straw that breaks the camel’s back, causing a significant rise in defaults, a corresponding decrease in credit quality and stricter lending standards.
Credit Card Debt Will Top $1.1 Trillion
By the end of 2018, U.S. consumers will likely owe more credit card debt than ever before. The current end-of-year record, set in 2017, is roughly $1 trillion. And we’re on pace to do worse than that in 2018, with WalletHub projecting a $70 billion increase in credit card debt when the final score is tallied.
The underlying data indicate that 2019 is likely to be even worse. So the real question is how much more can we handle before even our minimum monthly payments become unmanageable?
We may find out sooner rather than later. The percentage of people who are 30 days past-due on their credit card payments has increased by 26% from the first quarter of 2016 through the third quarter of 2018, according to the most recent data available from Equifax. And the share of credit card users who are 60+ days past-due rose by 17% over the same period. This trend could easily worsen, and quickly, as we continue to rack up more debt and the Fed continues to make it more expensive.
“I'm getting more concerned about consumer debt levels. Consumers seem a little too willing to borrow,” said Emily Gallagher, an assistant professor of finance with the Leeds School of Business at the University of Colorado, Boulder. “Monthly payments are quite affordable because rates are still unusually low and jobs are plentiful. That won't always be the case, and today's debt levels will bite consumers in the next recession. My advice to consumers: Watch your borrowing.”
Consumer Credit Scores Will Set Another Record in 2019
The average credit score rose four points during 2018, from 679 to 683, according to data from TransUnion. This marks a slowdown in credit-score growth relative to 2017, when the average score rose 10 points. And while there are very good reasons to expect continued credit-score improvement in 2019, some signs also point to the potential for stagnation.
On the bright side, low unemployment and continued economic growth are major tailwinds for credit scores, and 2019 is looking good in both regards. Furthermore, negative records from the Great Recession are still falling off consumers’ credit reports. Bankruptcies can stay on credit reports for up to 10 years. And the unemployment rate didn’t start dropping from financial-crisis highs until 2011.
We’re starting to see cracks in the foundation, though. In particular, 30-day delinquency rates rose for credit cards, auto loans and mortgages during 2018. An increase in delinquency has been a long time coming, considering just how much debt we’ve racked up in recent years and how low delinquency rates have been relative to historical norms.
If delinquency rates start rising faster, that will begin to drag down the national average credit score. But we don’t expect that to happen until at least 2020. For 2019, we can expect the economy’s continued strength to push credit scores even further into record territory.
U.S. Auto Sales Will Fall Just Shy of 17M, Breaking the Four-Year Streak
People keep waiting for the post-recession car-buying boom to end, but it just keeps chugging along. The average car is 11.7 years old, according to the research firm IHS Markit. Technological advances continue to drive interest. And record-setting natural disasters are even having an effect, forcing people to replace their totaled wheels.
As a result, we don’t see much of a slowdown in 2019. But whether or not we’re in for another year of 17+ million light vehicles sold remains to be seen. It will be close, though. JD Power projects 17.0 million. The National Automobile Dealers Association expects 16.8 million. WalletHub’s prediction splits the difference at 16.9 million.
Still, there is a case to be made for car-buying losing steam in 2019. “Auto sales will remain depressed through 2019 as most current auto owners do not need a new vehicle because they already have a relatively new vehicle,” said E. Tylor Claggett, a professor of finance in the Perdue School of Business, Salisbury University. “The recession of 2008-09 caused many potential auto buyers to delay new car, SUV, or pick-up truck purchases for several years. Consequently, there was much pent-up demand a few years ago which has, for the most part, been satisfied.”
Existing Home Sales Will Hit 5.5M, Despite Higher Rates
Unlike credit cards, most mortgages aren’t directly affected by Fed rate hikes. Nearly 90% of mortgages have fixed rates and a 30-year term. And despite the Fed raising its target rate by 175 basis points from December 2015 through November 2018, the average APR on a 30-year fixed rate mortgage has increased by less than 70 basis points, according to data from Freddie Mac. But when people hear rates are rising, they think the window to borrow on the cheap is closing. And that can lead to more home sales.
Through October, existing home sales are 5% behind 2017’s pace, according to the most recent data from the National Association of Realtors. We ended 2017 with roughly 5.51 million homes sold, thanks to a strong fourth quarter. And we expect similar results this year, continuing into 2019.
“Mortgage availability will grow, as the long-term interest rates are not going to increase as much as short term rates and further increases will not be as quick or as steep,” said Fariz Huseynov, an associate professor of finance at North Dakota State University. “We will be much closer to a neutral rate in mid-2019.”
Ask the Experts: 2019 Economic Predictions
WalletHub’s editors aren’t the only ones with predictions about money matters in 2019. We asked a panel of economics professors to share their thoughts on what your wallet’s future holds. Just click on an expert’s picture below to see what he or she had to say in response to the following questions.
General Economic Questions:
- How will the U.S. economy perform in 2019? Do you have a prediction for GDP growth?
- What do you think the unemployment rate will be at the end of 2019?
- To what extent will the financial health of the average American change in 2019?
- What do you expect from the stock market in 2019? At what level will the S&P 500 finish the year?
- If you had to make one prediction for the economy / consumer finances in 2019, what would it be?
- What is the biggest threat for consumers' wallets in 2019?
Credit Market Questions:
- How many times do you think the Federal Reserve Open Markets Committee will raise its target rate in 2019, and at what level will the target rate end the year?
- Do you believe credit will become more or less available in 2019, and why?
- Do you expect consumer debt levels to rise, fall or stay the same in 2019?
- What are your expectations for home sales and mortgage availability in 2019?
- Will annual auto sales grow or regress in 2019?
Grading Previous Predictions
Anyone can make a wild guess, and even a broken clock is right twice a day. But a prediction backed by a track record of on-point projections carries a bit more weight. Plus, predictions are a lot more fun when you check to see how they pan out.
So we always end the year by grading the predictions that we made before it started. You can check out our report card below. As you can see, 2017 was a down year, largely because the stock market performed well beyond our expectations. But most everyone missed that one, and it just goes to show why you should always stay invested and avoid trying to time the market.
Grading Previous Predictions
Note: The GPAs for 2012 and 2013 reflect grades for WalletHub’s credit predictions alone, as overall financial predictions were not made for those years. The GPAs for 2014 onward reflect averages for WalletHub's credit and financial predictions.
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