2018 Market Review1

Last year was a little bumpy for markets near the end of the year. This excerpt from How Every Asset Class, Currency, and Sector Performed in 2018 by Jeff Desjardins at Visual Capitalist sums up 2018 really well:

“We’re only a few days into 2019, but it appears markets have picked up exactly where they left off.

There is growing uncertainty and volatility almost everywhere, and individual events are starting to become catalysts for sell-offs or rallies. Whether it’s Apple’s recent profit warning or Fed chair Jerome Powell saying that he is “listening closely”to the markets, investors are taking cues from current events to figure out where the herd is grazing.

It’s hard to say where markets will head in 2019 – but before we get into the nitty-gritty of a new year, it’s worth taking one final look back at 2018 to see how it impacted investors.

How markets did in 2018

We’ll start with broad asset classes, including stocks, bonds, commodities, and cash:

Asset Classes in 2018
Note: Figures for equity markets are not including dividends

As you can see, it’s mostly a sea of red.

Cash turned out to be best option for the year, and several asset classes were crushed over the course of 2018, including crude oil and nearly all stocks. Despite this, large cap U.S. stocks (S&P 500) had no issues in outperforming equity alternatives, like smallcap stocks, foreign stocks, or emerging markets.” – Jeff Desjardins

The January Effect

As we climb out of a small market dip, we are in a period that traditionally experiences a seasonal increase in market prices. January is known to increase the value of many stocks and this is called the January Effect. “Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off. Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month.2

Market Rally?3

According to Matthew Myland, Chief Investment Officer at Solomon,”Equity markets continue to rebound off of the December lows. This movement is normal in BEAR MARKETS as it relieves the oversold conditions. Once the market rallies enough for oversold conditions to dissipate and a lower high is achieved thus setting up the next decline in the bear market.”

Maybe Not…

We have seen a number of factors that could indicate a future market downturn. Historical data indicates a cyclical shift may be in-the-works, as do the following speculative economic indicators:

Free Asset Monitoring Can Provide Fore-warning

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Is Your Portfolio Stable?

When the market eventually shifts, it’s important to have a plan. You may even consider the possibility of re-allocating assets. This varies greatly by investment portfolio and should be evaluated on a case-by-case basis, with a qualified financial professional. It’s best to work with a fiduciary, because we value our client’s needs above our own and only recommend investments that benefit them.

Contact Me To Evaluate Your Investments: (512) 638-9499.

Works Cited:
  1. Jeff Desjardins. Visual Capitalist. Jan. 4 2019. “How Every Asset Class, Currency, and Sector Performed in 2018.” https://www.visualcapitalist.com/how-every-asset-class-currency-and-sector-performed-in-2018/. Accessed Jan. 9, 2019.
  2. James Chen. Investopedia. Jan. 2, 2019. “January Effect.” https://www.investopedia.com/terms/j/januaryeffect.asp. Accessed Jan. 9, 2019.
  3. Matthew Myland. http://solomonapi.com/.
  4. Fred Imbert. CNBC. Dec. 31, 2018. “US stocks post worst year in a decade as the S&P 500 falls more than 6% in 2018.” https://www.cnbc.com/2018/12/31/stock-market-wall-street-stocks-eye-us-china-trade-talks.html. Accessed Jan. 10, 2019.