After a turbulent 4th quarter of 2018, the stock market reversed course in January, with most leading indexes posting solid gains. Despite some growing economic concerns, the U.S. stock market continued to rebound in February. By the end of Q1, lackluster US job-creation numbers were reported, and falling manufacturing in the eurozone, Japan, and the US added to the worries. But the markets remained robust.
By April, all the losses suffered in Dec 2018 had been gained back. Economic growth beat expectations. Unemployment remained low and inflation subdued. After four consecutive months of rising stock prices, the market finally stumbled in May – along with bond yields and oil prices – as concerns mounted over the lingering trade war between the U.S. and China. S&P 500 dropped by 5% taking all the other major indices with it. Stocks rallied back in June as government bond yields continued to sag amidst speculation that the Federal Reserve will soon cut rates.
With the economy showing signs of a slowdown, the Federal Reserve cut interest rates by 0.25% on July 31 – the first rate cut since 2008 – to a target range of 2.00 to 2.25%. Escalating tariff and trade conflicts, as well as concerns over the U.S. and global economy, led to a volatile month in the markets in August. The S&P 500 Index dropped 1.81% for the month. There was a lot of news in September, from the announcement of an impeachment inquiry to an attack on Saudi oil facilities. But the markets edged up with S&P 500 gaining back August losses.
In October, the economy showed some signs of weakness, as retail sales declined, job growth dipped below recent averages, and gross domestic product (GDP) experienced only moderate growth. The Fed cut rates by 0.25% on October 30 for the third time this year to attempt to boost the sagging economy. Going into November, the consensus was that market appears overbought and should experience a pullback before its year-end surge. But, stocks notched solid gains in November, thanks to solid economic data, improving trade sentiment, and upside earnings surprises. Entering December, investors began having flashbacks to last year, when the market suffered its worst December since the Great Depression amid the intensified U.S.-China trade war and a rate increase from the Federal Reserve.
Future Wealth’s View
With just six trading days left, it looks all but certain that 2019 will go down as one of the best years in the stock market. Looking at the uncertainty that existed all year, defensive investments was perhaps the most judicious strategy. Despite the conservative tilt in our client portfolios, all of our clients enjoyed double digit returns ranging from low teens at the most conservative level to mid twenties at the most aggressive level. They gave away few basis points in return for safety relative to the S&P 500. But, their portfolios withstood the mid year volatility and managed to squeak out better than average returns by year end.
Wishing all of our readers and clients of Future Wealth LLC – Merry Christmas and Happy New Year.