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The years of easy money in the stock market are coming to an end

Scott Gamm

The ‘end of easy’ in the stock market is upon us.

That’s the assessment from Wells Fargo Investment Institute, led by president Darrell Cronk, who spoke to Yahoo Finance about his 2019 market outlook.

The S&P 500 has returned an average of 15% annually over the past decade. It’s hard not to make money in that kind of environment.

“We think there are a number of shifting conditions from what we’ve enjoyed over the past 8-9 years of the cycle,” Cronk said.

Here are a few of the shifts:

    • Cheap capital is diminishing amid rising interest rates.
    • Monetary stimulus is fading, as central banks around the world are winding down quantitative easing that had pumped liquidity in markets for years
    • 2019 will be the peak of fiscal stimulus
    • A slowing of job gains
In this Thursday, Nov. 29, 2018, photo, specialist John O’Hara, left, works with traders at his post on the floor of the New York Stock Exchange. (AP Photo/Richard Drew)

Even with such conditions, Cronk still expects the S&P 500 (^GSPC) to return 6-7% in 2019, including dividends.

“That would be less than what we’ve enjoyed for much of the cycle but it would be consistent with late cycle type returns,” he said. The S&P 500, so far in 2018, is up 4.4%.

For 2019, Cronk likes the technology, financials and industrials sectors. “Still pro-growth sectors,” he said. “We think you’ll get more participation across the sectors.”

Trade risks

There are still risks on the horizon, however.

Even though President Trump threw markets a bone by delaying the China trade tariffs that were set to take effect on January 1, 2019, by 90 days, trade still remains a key risk for the markets, according to Cronk.

“I think [trade] will remain front and center for much of 2019,” Cronk said, adding that as long as we make slow, iterative progress on the trade front, the markets will be pleased.

“Any material steps backwards and I think that causes the market some more anxiety,” Cronk said.

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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