With 2019 officially underway, Austin College professor and certified personal accountant Shannon Cornelison-Brown joined Grayson Magazine for a Q&A session recapping last year’s economic performance and to offer her financial predictions and advice heading into the new year.
The following responses were made in early December 2018 and were edited, in some cases, for length.
Overall, how well would you say the U.S. economy did in 2018?
“The U.S. economy maintained a solid pace of growth for 2018. A tight labor market strengthened private consumption, which was coupled with heightened government spending. The U.S. is still experiencing strong job gains, raising wage growth and consumer confidence continuing into the last month of the year.
“All of this being said, due to the U.S.-China trade war, exports have contracted for the first time in nearly two years. Residential investment is beginning to decline. Fiscal stimulus is beginning to fade and steady interest rate hikes have begun to drag growth. The U.S. economy appears to be positioned to slow in 2019 and 2020. Considering the United States is in the second-longest economic expansion in history, the potential for a recession appears to be looming.”
The holiday shopping season tends to give the markets a boost, but how will they fare at the beginning of the year?
“The market that experiences the biggest boost in the fourth quarter of a calendar year is retail. The retail industry has seen a shift in the historical operating model. Instead of focusing on goods sold online versus in store, retailers are focused on creating experiences that give customers more control and convenience. As for the cycle of sales, heavy fourth quarter sales due to the holiday shopping continue to slow the retail and the general market for the first quarter of the following year.”
The holidays can also be an expensive time for consumers. What tips can you offer to help people establish health spending and saving habits this year?
“My biggest financial tip for this scenario is to set a budget. I recommend establishing health goals, educational goals, career goals, spiritual goals, financial goals and goals in any other area deemed important to you. From this comprehensive goals list, create a budget that helps you obtain those goals.”
Are there any financial wild cards that might shake up markets in 2019?
“On Saturday, December 1, 2018, US President Donald Trump and China’s President Xi Jinping agreed to suspend any new tariffs in the current escalating trade war. Tariffs were due to increase from 10 to 25 percent on January 1. Now, due to the agreement at the G20 summit on December 1, the tariffs stay stagnant for the next 90 days. If the United States and China cannot reach an agreement during the next 90 days, the U.S. tariffs will jump to 25% on approximately $200 billion worth of goods, while China has targeted $110 billion of U.S. imports for tariffs.
“Another financial wild card is the Fed Funds interest rate and the correlation to the real estate market. The US has experienced two upticks in the Fed Funds interest rate in 2018, with the most recent increase on September 27, 2018. Due to the increase in the Fed Funds interest rate, the total cost of financing a home increases, directly affecting the housing market. If the Fed Funds interest rate increases once more in 2019, the US housing market, which makes up one-sixth of the US economy … could experience a much weaker economy.”