After almost a decade of calm, 2018 was anything but status quo. The year was rife with market volatility, political upheaval, climate disasters, personal data dystopia, global economic uncertainty and so much more. The good news is that we get to start anew every January first. The not-so-good news is that 2019 promises to be just as chaotic as its predecessor.
Our editors looked into their crystal balls to predict what the most-searched terms across Investopedia will be in the coming year. Some of these themes already started to simmer in 2018. Others seem less obvious. What’s for certain is that none of us know how things are going to play out once the clock strikes midnight, the fireworks fade and 2019 comes rushing in. That said, making predictions is fun, so here are ours, in alphabetical order.
Artificial Intelligence (AI)
Japanese tech company Groove X released a robot this week whose only task is to make people happy. (Just in time for the holiday season.) The “Lovot” uses artificial intelligence to mimic human empathy, which makes you wonder, is AI getting more complex or are we just getting easier to figure out?
From Siri and Alexa to autonomous vehicles and facial recognition, there’s a dizzying array of AI applications on the table right now. We’re not quite at the point of “iRobot,” but expect this term list to be automated in 2019.
As we write this, nearly half the stocks in the S&P 500 index are in a bear market, loosely defined as down 20% from their highs. The Nasdaq is officially in bear territory and all signs are pointing to more damage for U.S. stocks. Around the world, equity markets in more than 20 countries are in bear territory, having fallen more sharply than markets in the U.S. through 2018.
While there’s plenty of argument about when the last bear market occurred in the U.S., we certainly haven’t had one in a while. Investors are worried about the one might be coming, how bad it will be and how long it will last. Bears are necessary and unavoidable cycles in markets and have been for centuries, but they are anything but warm and cuddly (sorry, Paddington). We expect this to be a big theme in 2019, and you should be buckled down and diversified well in preparation.
As big-name companies figure out how to implement blockchain technology, the finance folks (us) are finally figuring out how to explain it. Blockchain first started as a technology to support Bitcoin and other cryptocurrencies back in 2008. A decade later, Bitcoin’s at a one-year low and blockchain’s now a household name. Just last week, my mom called to ask me about “block-chain,” which is my personal litmus test for knowing when technology has finally caught on. Expect to see blockchain technology expanding into mainstream applications in banking, medical-record keeping and voting in 2019.
This may be easily the biggest story for the global economy in 2019. The negotiations surrounding the U.K.’s withdrawal from the European Union (EU)—Brexit—played a major role in European politics throughout 2018 and will only grow in importance next year. The U.K.'s European Union (Withdrawal) Act 2018 targets March 29, 2019, as the official "exit day,” when the U.K. will leave the EU.
As this date draws nearer, it remains unclear what the process for withdrawal will be, what impacts the event will have on local and global markets, and how Brexit will affect the U.K. and the EU. Of course, there's a small possibility that Brexit won't happen at all. If that indeed becomes the case, though, we expect readers to still be interested in the events surrounding a failed Brexit and its long-term implications for the future of Europe.
A correction is already happening. Major U.S. markets are down more than 20% off their records highs in September, which is the technical definition of a market correction. Just how bad will things get? We have no idea, but expect to continue to hear this word a lot and, just maybe, we can correct the correction.
This is not a technical term or a scene out of a Nicholas Cage movie. We hear it among traders describing a vicious selloff that 'rips their face' off. We've had a few of those in 2018, and they are not pretty. We have a feeling we'll see and hear this term a lot more in the new year.
Since the markets peaked in September, there’s been heightened talk about signs of a possible recession. We've seen the spread narrow between long-term and short-term government bond yields, with the difference in yields between the three- and five-year Treasuries dropping below zero earlier this month. That’s what’s known as an “inverted yield curve.”
Historically, when the yield curve inverts, a recession often follows, though such a recession could take several years to materialize. Other bad omens: Housing prices and real estate investments have dropped, global growth has slowed, and stock markets around the world have been on increasingly shaky footing. Meanwhile, the Federal Reserve is contemplating additional interest rate increases next year, which could exacerbate the economy's decline. These and other developing factors will likely add fire to fears that 2019 could see the global economy tipping into recession.
Registered Investment Advisor
The number of registered investment advisors (RIAs) has been growing over the past few years. We think that’s a good thing. RIAs can be small, independent businesses or can be affiliated with larger money management firms like Schwab or Fidelity. The term RIA also refers to a subset of professional advisors who can help you do much more than decide how to invest: They help you plan and execute your financial life.
The advisory profession isn’t without its challenges: The last decade has seen the rise of robo-advisors that help investors manage their money at a lower price than it costs to hire a real person. But these strategies remain untested in a real bear market or recession. We’re not making the call that either is upon us. But we do know that there’s a real value being able to call a real person who has your best interests in mind when volatility hits.
This term is already hot as some investors use short selling to try to bet on further market declines. It’s also one of the core “fear-based” terms that we track as part of the Investopedia Anxiety Index, which has spiked in light of the markets’ recent downturn. Short selling is extremely risky since it requires the seller to “borrow” shares from a broker on margin at a lower price than they currently trade, and sell them if and when the shares hit that lower price. If the share price goes the other way, the short seller has to buy the shares at a higher price, plus interest. Sound complicated? It is, which is why it is not recommended for amateurs.
Socially Responsible Investing
2018 was full of unfortunate data points that demonstrated how important socially responsible investing may prove. Natural disasters were exacerbated by climate change; privacy and influence scandals brought tech darlings back to earth (Facebook), and investors everywhere were reminded why strong corporate governance is important. Also: The U.S. and UN separately released dour reports on the economic implications of climate change.
Flows into socially responsible and ESG (Environmental, Social and Governance) funds have continued to grow, especially among younger investors. Numerous studies were published indicating that ESG screens do not harm investment performance. All that’s to say that we’re now approaching (or have surpassed, depending on whom you ask) the 10% tipping point where trends go mainstream. As Millennials and Gen Xers continue to earn/inherit more, that trend is only going to continue.
Subprime Auto Loan
It’s no housing crisis in the making, but auto loan debt—as well as delinquencies against those loans—is increasing at an alarming rate. According to the Federal Reserve, new- and used-car loan issuance is at multi-year highs, and delinquencies among borrowers with low or subprime credit are the highest they have been since 2008.
Subprime auto loans have even gotten the attention of Steve Eisman, the investor who notably called the housing crisis and was played by Steve Carrell in “The Big Short.” After mortgages, auto loans are the largest area of consumer debt. And as interest rates rise, those loans get costlier for Americans who are finding it harder and harder to make ends meet. We hope this doesn’t get worse, but we do plan to keep an eye out.
With sentiment so sour and volatility so intense, there is nowhere to go but up, sometimes. We can't help but think things might actually be better in some areas in 2019. We are not sure what those are, but we can't wait to be surprised to the upside. We are rooting for better days ahead.
It's not lost on us that a lot of these predictions are pretty dour. We are actually a fun-loving crew who loves to learn, read and write about investing and finance. Amid these tenuous conditions, we know it is our great privilege to be able to do that for millions of readers all over the world. These are volatile times for everyone, but never forget the important things like family, friendship, and health.
We wish you all of those things in 2019.
The Editors of Investopedia