2018 Year End Review

It was difficult to make money in 2018. The equity markets experienced their worst year since 2008, and had their worst December performance since 1931, despite a furious rally the last week. The bond market, facing rising interest rates all year, was negative most of the year until a December rally left it even for the year. Global stocks fared worse that U.S. stocks as questions about world wide economic growth rates hung over markets around the world.

We have talked a lot the past year about the record setting bull market that started back in 2009. In December of this year, the S&P 500 dropped 19.8% from it’s high, just short of the 20% needed to be considered a bear market. Technically, the bull market lives on, although it’s on life support. Many markets and individual stocks are well into bear market territory, and it seems likely that the rest of the market will follow. It is worth noting that even with the pullback in stock prices, the market remains expensive relative to earnings. To become more reasonably priced, we will need to see further market drops and/or increased corporate earnings, which, based on current forecasts, is increasingly unlikely.

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