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Market outlooks

Alan Greenspan believes the great stock market run is over.

There could be a spark of life left, but "it would be very surprising to see it sort of stabilize here, and then take off," the former chair of the Federal Reserve said in a recent TV interview.

And, he told CNN in mid-December, when an uneasy 2018 was closing out, "at the end of that run, run for cover."

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Former Federal Reserve chair Alan GreenspanSAUL LOEB/AFP/Getty Images

Stocks suffered a turbulent year, running up and then being buffeted by fears of slower global economic growth, tighter monetary policy and mounting trade battles, among other issues.

They ended the year with losses, the damage looking like this:

As markets closed on New Year’s Eve, Tobias Levkovich, Citigroup’s chief U.S. equity strategist, cut his outlook for both the S&P 500 and the Dow.

“Equities still offer meaningful appreciation potential as sentiment, valuation and domestic economic conditions all argue for upside,” he said in his outlook.

“The credit backdrop remains conducive for GDP expansion, recognizing that exogenous variables such as unpredictable trade dynamics could be disruptive. Challenges exist but a near 450 point drop in the S&P 500 over the past three months reflects growing risks.”

Mr. Levkovich now sees a year-end target of 2,850 as “more reasonable” for the S&P 500, although “dramatic daily trading moves make one consider a 2,750-2,950 range.” His new call is down from 3,100 earlier.

He also trimmed his 2019 target for the Dow to 26,000 from 28,100.

“Many worry about President Trump’s trade policies and his unpredictable style but history is on the administration’s side, with the third year of the presidential cycle generally being a good year for equity market returns,” Mr. Levkovich said.

The views of Mr. Greenspan and Mr. Levkovich are just two of many. Here are six more, collected over the past couple of weeks before certain developments, such as the U.S. and China saying they were hopeful of resolving their trade dispute after progress in talks.

John Higgins, chief markets economist, Capital Economics

"The corrections of 1990 and 2007/8 coincided with the onset of recessions. (The correction of 2011 was triggered by the crisis in Greece.) While we aren’t explicitly forecasting a recession [this] year, we wouldn’t rule out a mild one. At the least, we expect a significant economic slowdown. This is a key reason why we think that the S&P 500 will end 2019 even lower than it is now."

Douglas Porter, chief economist, Bank of Montreal

Mr. Porter projects the S&P/TSX Composite Index will outperform the S&P 500 in 2019, following a year that saw a tremendous gap between the western Canadian oil benchmark, Western Canada Select, and its global counterparts, and trade concerns in the run-up to the U.S. Mexico Canada Agreement that replaced NAFTA.

“Admittedly, this may be a case of winning by not losing; but, after a double-digit decline in the TSX this year, we look for a small turnaround. From trade uncertainty, to a housing cool-down, to record WCS differentials, it was a challenging year for Toronto equities (although many markets suffered even mightier setbacks). In fact, the TSX has underperformed the S&P in seven of the past eight years, with only 2016 the outlier. But this drought followed a long stretch of outperformance; i.e., there is persistence. Typically, it’s fairly straightforward- when real commodity prices are rising, the TSX shines. However, with trade uncertainty reduced (USMCA) and a lot of bad news on energy factored in, [this] year could see a rare win for the TSX, at least on a relative basis.”

Royce Mendes, senior economist, and Katherine Judge, economist, CIBC World Markets

"Global growth has cooled since the summer months and investor expectations have become increasingly pessimistic at the same time. However, it appears that some of that gloom could be overstated. Although the impact of tax reform on the U.S. has started to fade, a tight labour market has provided ammunition for continued strong consumption, which has kept U.S. GDP growth above potential. However, sentiment for the U.S. economy is approaching levels not seen since the recession. A similar story is true in the euro zone, where sentiment is approaching levels last seen during the sovereign debt crisis, despite a partly transitory slowdown in economic data. That suggests that while global growth could slow further, equities could be somewhat shielded given the amount of caution that is already priced in."

Luc Vallée, chief strategist, and Dominique Lapointe, economist, Laurentian Bank Securities

"Excess pessimism is likely to mark the beginning of 2019 and linger until real progress is made on the global trade front. Incidentally, central banks communication related to future monetary tightening have become more dovish in recent weeks to allow such repositioning if it were to become necessary. We expect these negative sentiments to persist until market participants’ fears are assuaged. Only then will central banks become less accommodative as they become less concerned with the economic outlook. At this point, we expect markets to recover strongly from their current depressed levels. It remains difficult to pinpoint the exact timing of such a change in sentiment but we think it is most likely to occur towards the end of the second quarter of 2019."

Peter Berezin, chief global strategist, BCA Research

"We downgraded global equities this summer based on lofty valuations, overly bullish sentiment, and the prospect of slowing global growth. Since then, valuations have improved, sentiment has turned more cautious, and while global growth will continue to decelerate in the first half of 2019, asset markets have largely discounted this outcome. Consistent with this turn of events, our ... equity model is now sending a more upbeat signal on equities, while flagging a more challenging outlook for bonds. As such, we recommend that clients overweight global equities during the next 12 months, underweight government bonds, and move cash allocations from overweight back down to neutral."

Nikolaos Panigirtzoglou, global market strategist, JPMorgan Chase

"In all, signs of capitulation by institutional investors are creating a window of opportunity for equity markets into Q1 assuming the [Federal Reserve] reacts to market stress and skips [raising interest rates at] the March meeting. But beyond March, a much bigger dovish shift would be required by the Fed to unwind the inversion at the front end of the U.S. yield curve. If such dovish shift does not materialize and the yield curve inversion fails to improve, any equity rally in Q1 would most likely be short-lived."

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