Economic predictions are always difficult, but analysts agree on one point: The volatility that the markets have exhibited and the mixed economic signals on display today are likely to remain even after the books have closed on 2018.

The largest economy in the world has any number of moving parts and factors that influence market valuations, consumer sentiment and financial stability. Economic experts say there are several key areas to watch that will determine how 2019 — and beyond — will unfold.

Stock market

“We’ve had a lot of client discussion, and this market activity has been making people nervous,” said Michael Stritch, chief investment officer at and head of investments at BMO Wealth Management. Last year, the stock market was unusually tranquil, with only a handful of days that saw indices move by a percentage point or more. As a result, “Even the average feels above average now,” he said.

For 2019, investors will need to reacquaint themselves with the ups and downs of a more typical market, and the pace of growth is likely to cool. “I’m thinking things will be slower. It’s just going to require patience,” said Mitchell O. Goldberg, president of ClientFirst Strategy.

Goldberg predicted that investors could see a period during which stock prices drop by 20 percent or more next year. “Between the highs from October and the end of next year we will have seen a bear market,” he said. “How much the market can go down is really tough to say — we could see downsides similar to the last two bear markets,” he said.

But this doesn’t mean a drop in stocks necessarily will be steady, or sustained. “This is not going to be a one-way market for the individual investor — it’s going to be one where you just grit your teeth and bear it a bit,” said Greg McBride, chief financial analyst at Bankrate.com.

McBride also said that next year will be marked by continued volatility. “The market will continue to bounce around… maybe a little bit deeper on the correction side, but we may also see a record high,” he said. “It’s important not to panic and sell.”

GDP and the threat of a recession

But even a drop into bear market territory doesn’t spell the end of the current period of economic expansion — at least, not yet. A new outlook survey from the National Association for Business Economics found that even the experts are split: Half of the professional forecasters surveyed predict a recession by the end of 2020. Most NABE respondents were sanguine about near-term recession risks in spite of volatility, though; only 20 percent expected the economy to enter recession by the second half of 2019.

There is a consensus that economic growth is likely to slow: NABE survey respondents are forecasting real GDP growth of 2.5 percent over the next year. Economists say this is to be expected, given that momentum the tax cuts and government spending delivered is beginning to fade. "There are some headwinds that will emerge as the fiscal spending tailwind will fall off at the end of 2019,” Stritch said.

At the same time, if consumer confidence remains high — if markers like the unemployment rate and wage gains continue to maintain or improve — consumer spending could help keep the momentum going. “U.S. consumers are doing well and gives that more of a tailwind,” Stritch said.

“Even though current conditions are high, it’s concern about future expectations. If the worries consumers have now materialize in 2019, you’ll see consumer confidence slip,” McBride said. That could impact spending, a bad sign for continued GDP growth.

The Fed

Goldberg predicted that the Federal Reserve will continue to be a primary influencer of market sentiment. “I see the most significant driver still as central banks, interest rates,” he said.

The market seems to be betting that the Federal Reserve will adopt a less aggressive stance in 2019, especially after Fed Chairman's dovish comments this week. “A lot can be overcome with really low interest rates,” Goldberg said.

And the threat of inflation remains muted: According to the Department of Labor, a key measure of wholesale prices rose just 0.1 percent last month and 2.5 percent on an annualized basis.

Aside from rates, the Fed’s other big area of impact is in the continued withdrawal from quantitative easing, McBride said.

“The continued downsizing of the balance sheet is going to have an influence on markets and long-term interest rates. In the long run, it’s not something either should be overly concerned about, but in the short term it creates a lot of uncertainty and has the potential to raise borrowing costs, and market volatility always leads to hesitancy,” he said.

Labor market

With an unemployment rate of 3.7 percent and wage gains finally seeking out a pace above 3 percent on an annualized basis, the labor market looks good now, but nervous investors are wondering how long it will last, particularly with trade-related pressures growing, and the prospect for more tariffs on the horizon.

“We’re not seeing the kind of weakness in the real economy yet that suggests we should be panicking,” said Josh Wright, chief economist at iCIMS, a hiring software company.

For 2019, “I would still expect unemployment to be lower but I expect job growth will be a little bit more modest, in the 150,000 to 180,000 range,” Wright said, adding that he could see the topline unemployment rate falling further, down to 3.5 percent or similar. “I see the deterioration being in 2020.”

Wright predicted that when the economy does cool, it will follow a similar pattern as the previous recession, when the number of discouraged and marginalized workers also mushroomed. “In a downside scenario, you’re going to have fewer people entering the labor market,” he said. “When we do see a rise in unemployment, underemployment will rise even more.”

Trade and tariffs

President Donald Trump has made tariffs a key weapon in the fight to win trade concessions, and the trajectory of next year’s economy hangs in the balance.

“He really cares most about the trade deficit, which is an issue he’s been focused on for many years before he became president and which he thinks — unfortunately, incorrectly — that he understands,” said Nick Lardy, a senior fellow at Peterson Institute for International Economics.

Although Trump has bragged about the tariffs the government has collected, the real cost is getting passed on domestically, Lardy said. “He doesn’t seem to understand it’s U.S. companies and households that are having to pay.”

Economists say the threat of a trade war is making businesses reluctant to make long-term investments. “Tariffs are going to be an economic headwind,” McBride said. “They’ll hurt consumers, they’ll hurt retailers and they’ll hurt exporters.”

“So far, the tariffs have been mostly on intermediate goods,” Lardy said, but Trump has threatened to levy tariffs on the entirety of Chinese goods imported into the U.S., a drastic step economists say certainly would be felt by Americans as consumers as well as employees.

“A lot of us expected to see it appear in manufacturing payrolls sooner than now,” Wright said. We have to consider what the timeline looks like and what the feedback loop could be from financial markets.”

The big challenge with Trump’s saber-rattling and railing against not only China but North American and European trading partners is the confusing and sometimes conflicting messages they send. “The threat of it goes back and forth depending on the most recent statements of various people in the White House and elsewhere,” Lardy said.

“It’s made it much more difficult to take a coordinated approach on China, and he’s lost credit with the Europeans completely,” he said. “To a considerable degree, we’re on our own.”

A unilaterally waged battle on all fronts would almost certainly have negative repercussions for the economy.

“People are concerned that, next year, growth is going to subside. Stimulus will be waning and tariffs will be biting even more,” Wright said. “What we know is financial markets don’t like uncertainty.”