2018 Year-end Report
There is a relatively old saying that has gone through various reiterations but is typically along the lines of “in life there are mountains, and there are valleys. You have to make it through one to get to the other.” It refers to the ups and downs that one can experience throughout their lifetime, but it can also be applied to other areas. By the end of the 2017 fiscal year, the market had surpassed numerous record highs that many believed would only continue into 2018. While some of those predictions did hold true, 2018 demonstrated that you may have to deal with both the mountains and valleys when investing.
Right out the gate of 2018, the S&P 500 began on a high note, reaching gains of +7.4% in just 18 trading sessions. Despite the initial surge, the S&P 500, Dow 30, and Nasdaq 100 all fell in March after major selloff in the technology sector pulled down stock measures across the board. Early concerns over then reports of imposed tariffs on Chinese trade may have also effected markets as investors weighed possible regulatory ramifications.
When the closing bells finally rang and signaled the end of the day for the 1st quarter, the Index had a decent rise of 1.4% for the day but was down 2.64% for the month. Some of the worst performing areas were: Financials, Materials, and Technology. Energy and Utilities performed quite well.
Many in the investing community voiced concerns over long term economic effects that could result from a possible oncoming trade dispute with China coupled with expected Federal interest rate hikes. Ratios of bull to bear investors remained nearly neck and neck, and many debated whether the longstanding bull market was showing early signs of coming to a close.
Despite these concerns and continued volatility, the 2nd and 3rd quarter ended in gains. The S&P reported total returns of 2.65% and 7.71% for the 1st quarter and 2nd quarter, and overall the index edged up 1.67% for the first 6 months of 2018. By the end of the 3rd quarter, the market had extremely good returns with a 7% quarterly return rate and the S&P 500 experiencing its best performance in nearly five years.
As mentioned earlier, with every mountain, there is typically a valley not too far away. This was the case for the final leg of 2018. Trade war fears, federal interest rate hikes, along with worries about contracting growth outside the U.S. may have played a role in the slowed growth activity and market downturn. In October, the S&P 500 lost $1.91 trillion. By the end of the year, the S&P 500 had a decline of 13.52% for the quarter, and 6.2% for 2018. Overall, the U.S. stocks posted the worst quarterly fall since the 2008 financial crisis.
One of the sectors that was hit the hardest was big technology, with many stocks underperforming and accounts of investors fleeing after earnings reports. By
Several factors may have played into this including bond yields and a fourth Federal interest rate increase. However, the job market has expanded substantially in the last year, with a growth of 3.7 % and a historically low unemployment rate.
The increase is on point with the Federal Reserve’s projections to insure that the inflation rate stay near 2% mark. Many voiced concerns that the hike coupled with an escalation in a Chinese trade war may actually cause an economic downslide. The U.S. has implemented tariffs on $250 billion worth in Chinese goods. There is a full list of products which have had implemented tariffs, but worries that these tariffs may require many tech giants to raise prices or face losses in their profit margins may have had a strong impact on investor’s optimism in the market.
Going forward into 2019, many are unsure of where the market is headed, and if the same issues and volatility will continue in the new fiscal year. Factors such as changing the political climate, many nations high debt levels, overseas trade, and interest rates may be on the top of many people’s minds when trying to gauge where the market is headed.
At the moment, the Federal Reserve has indicated that two more rate increases are to be expected. Some experts believe this may be good in the long run but may cause some turbulence at the start. Only time can truly tell.
The trade dispute with China still continues. Stimulus from tax cuts have been predicted by some to fade in the next year. Many hope that China’s need for a trade deal to combat an economic downturn may prompt a quicker resolution.
One issue that may have had a strong effect on December’s economic turmoil is many investors’ concerns over the ongoing political uncertainty in Washington. At the end of December, the federal government partially shut down after both sides of the aisle were unable to compromise over funding for a U.S. Border Wall. As this shutdown continues, many are uncertain of the long-term economic fallout.
Investment anxiety can arise from uncertainty, which is why it can be beneficial to meet with your advisor to discuss long term goals and risk tolerance so that together we can develop a financial roadmap that best suits you. A review of your asset allocation, time horizon, and risk tolerance is key.
While life may be filled with mountains and valleys, our team is here to guide you throughout the journey – today, tomorrow, and for generations to come.
Investment advisory services offered through Ciccarelli Advisory Services, Inc., a registered investment adviser independent of FSC Securities Corporation. Securities and additional investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment adviser. 9601 Tamiami Trail North, Naples, FL. 239-262-6577.
Sources:
Standard & Poor’s 500 Index Data:
Trade Tariffs Data
Nasdaq Composite Data
Federal Interest Rate Data:
