The bull run will continue in 2019, but it may be time to start getting defensive and raise cash allocations, according to Goldman Sachs’ 2019 stock market outlook released on Monday.

“We forecast S&P 500 will generate a modest single-digit absolute return in 2019. The risk-adjusted return will be less than half the long-term average. Cash will represent a competitive asset class to stocks for the first time in many years,” David Kostin, chief equity strategist at Goldman Sachs, said.

The bank laid out three scenarios for the market in 2019. First, a base case with a 50% probability of occurring, the S&P 500 (^GSPC) rises 5% to 3,000 after having closed at 2,850 in 2018. The second most likely outcome with a 30% probability is the downside or bear case that the S&P ends at 2,500 at year-end 2019 on fears that a recession is likely in 2020. Finally the least likely but most bullish outcome with a 20% chance of coming to fruition would be that the S&P closes 2019 at 3,400.

Goldman predicts that the stock market and economy will only modestly grow in 2019.

“For equity investors, risk is high and the margin of safety is low because stock valuations are elevated compared with history … [and] average annual [GDP] growth will decelerate to 2.5% in 2019, 1.6% in 2020, and 1.5% in 2021,” Kostin explained.

Raise cash

Furthermore, for the first time in years, Goldman recommended that investors continue equity exposure, but raise their cash allocations.

“Households, mutual funds, pension funds, and foreign investors have equity allocations ranking in the 89th percentile vs. history but have cash allocations at just the 1st percentile,” Kostin said.

It is time to get defensive by investing in the Utilities, Consumer Staples and Communications sectors, according to Goldman. “Since 1976, the Utilities sector has outperformed S&P 500 by a median of 11 pp from peak to trough during 18 S&P 500 corrections of at least 10%, posting a 100% hit rate of outperformance. The Communication Services and Consumer Staples sectors have also performed strongly during market corrections given lower betas to S&P 500.”

Additionally, despite tech’s recent underperformance, Goldman still remains bullish on the group going into 2019. “Real growth in software investment has been positive for nearly 50 years, with the exception of four quarters during the early 2000s. The sector also offers profit margins that are more than 2x the rest of the index, leading to strong cash flow generation that will allow companies to return cash to shareholders or continue to invest for future growth.”