Infrastructure, markets to be driven by policy

2019 could see policies out of Washington having more effects on markets, and the possibility of some progress on infrastructure.

"The two issues that drive where I think markets are headed next year are trade and tariffs and Fed policy. We're really talking about a year of transition," said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management, Boston. He thinks "markets are getting used to" President Donald Trump's public style of negotiating. He also believes that congressional gridlock could be a good thing. "Other things matter more, and markets are very good about being pragmatic."

One potential area for bipartisan compromise could be infrastructure. Henry Cisneros, principal at Siebert Cisneros Shank & Co. LLC in San Antonio, which manages financing for large-scale infrastructure projections, said he thinks the focus will shift to private sources from public funding, with Washington's help.

"I think the next big step in American infrastructure funding will be application of private capital through pensions funds, insurances, university endowments and any other capital source that is looking for long-term returns because they derive from sources that the public needs," said Mr. Cisneros, who served as secretary of Housing and Urban Development under President Bill Clinton.

"It may be possible that we can find a compromise on something like the gas tax," which is an easier sell when gas prices are low, he said.

The incoming chairman of the House Budget Committee, Rep. John Yarmuth, D-Ky., has already announced plans to introduce legislation creating a National Infrastructure Development Bank financed by selling up to $300 billion of Rebuild America Bonds to private and public pension funds.

With good political talking points in a pre-election year about how infrastructure projects create jobs and support the economy, "I do think that conversation will start. I pray that in 2019 there will be a moment of partisan peace," Mr. Cisneros said.