The U.S. stock market experiences its worst December since 1931!
PORTLAND, OR, February 20, 2019 /24-7PressRelease/ — 2018 was a year that tested every investor, across the board. Whether you practice global diversification, invest in a specific index (i.e. S&P 500), or utilize a balanced portfolio (stocks and bonds), there was truly no place to hide.
The U.S. stock market experienced its worst December since 1931, and topped it all off with the largest decline on Christmas Eve in history. On a tiny bright note; bonds had been in negative territory all year, but managed to squeak out a last-minute positive return due to December’s dismal stock market slide. If they had ended 2018 with a loss, it would’ve been the first calendar year in history when both stocks and bonds produced a negative return.
Listed below are returns of five major indexes for 2018;
S&P 500 – 4.38%
Russell 2000 – 11.01%
BarCap US Agg Bond + 0.01%
MSCI EAFE (Europe) – 13.79%
MSCI EM (Emerging Markets) – 14.58%
As bad as all of that may look, and feel, please remember; many all-stock portfolios saw flat or negative returns in 2011, 2015 and 2018, but have also more than doubled in value over the last 8 years. Markets do not go up in a straight line, but they do go up over time.
Major headwinds the markets faced in 2018, and continue to face today, are the trade war with China, the Federal Reserve, and the reality that on a year-over-year basis the recent tax reform would not produce a similar jolt to corporate earnings in 2019 as it did the year before. Here’s the good news, however:
The more damage caused by the trade war, the closer we’ll get to a deal. Trade wars and tariffs are good for no one and there are no winners. Once a deal is done, however, the positive impact felt will be nearly immediate.
One month ago, the Fed was poised to raise rates four more times in 2019. Now they’ve lowered that target to two. We believe there’s a good chance we won’t even see one. Again; more damage done to the market and overall economy, in part due to the Fed’s tightening, the better chance they will postpone further rate hikes.
At the end of the day, stocks move based on how well (or not) companies are doing. Earnings were fantastic all throughout 2018, including what was reported during the fourth quarter. Strong earnings the last 90 days, however, were completely overshadowed by the trade war and Fed, and the uncertainties produced for 2019. All-in-all; we believe earnings will come in above consensus, providing solid footing to the overall market.
The stock market is positive approximately 80% of the time with a 10% annual return, on average. Missing the 10 best trading days of any given year erases nearly 40% of that return. So as bad as the negative years feel, please remember that they are simply part of long-term investing. Stick to the basics; diversify, invest per your time horizon and stay the course, in both good and bad times.
Please let us know if there’s anything we can do to help at this time.
Sloy, Dahl & Holst, Inc. is a registered, full-service financial advisory firm dedicated to our clients’ financial achievement. As a boutique investment house, we tailor every investment portfolio we manage to meet each client’s specific goals.
Sloy, Dahl & Holst, Inc.
Shantel Sloy, Public Relations
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