For the first time since 2008, the stock market (as measured by the S&P 500) finished in the red last year. That statement in and of itself is pretty amazing. The fact that we went nine years in row without a down year is impressive. But let’s take a deeper dive into what happened in 2018.
With all the volatility and dramatic headlines, it’s important to know that the S&P 500 was only down 4.38%* for the year. It definitely felt worse than that as the index lost a whopping 13.52% in just the last quarter. Remarkably, the market experienced 64 days when it closed higher or lower by 1% or more^. That’s 25% of all the trading days! Compare this to only eight of those days in 2017. Interestingly, the lack of volatility in 2017 was more unusual than the volatility in 2018.
The year was marked by extremes. By January 26th, the market was already up 7.45%** year to date. Fueled by the Tax Cuts and Jobs Act, which promised lower tax rates and huge repatriations of foreign profits by our multi-national corporations. A mere nine trading days later, the S&P 500 had dropped 10.16%** as wage inflation hit 2.9% and introduced the fear of rampant inflation. Continued talk of tariffs and a trade war with China kept the markets choppy throughout the year. But, by September 20th, the S&P 500 hit a new all-time closing high of 2,930.75. Then the bottom seemed to drop out. The market spent most of the fourth quarter in a downward spiral, culminating in the worst Christmas Eve trading session in history. That day the S&P 500 dropped 2.71%, closing at its low for the year at 2,351.10. This was down 19.78%** from the most recent high. Finally, a significant bounce after Christmas took us to the year-end close of 2,506.85.
Phew! That’s a lot of movement for a 4.38% loss. But let’s put some context around this number. Remember that the highly volatile down year of 2018, was preceded by a gain of 21.83% in 2017. This gives us a three year and five year average annual return of 9.26% and 8.49%, respectively, as of 12/31/2018^^. Since the beginning of this year, the S&P 500 is already up 5.13%** (through 1/23/2019). This may seem like too far, too fast to many (myself included), but remember what happened in the fourth quarter of last year. It can be argued that the market went down too far, so the recovery we’re seeing now may be warranted.
2019 is just getting started, but it’s already been very interesting. As we continue through the year, there will be many challenges. The current Government shut down has not yet affected the stock market, but this could change if it goes on much longer. Our economy still seems healthy, but growth could be slowing. And, the elephant in the room remains the potential trade war with China. As calm as 2017 was, and as volatile as 2018 was, I hope to see something in between for this year. But only time will tell.
* Unless otherwise noted (as price only), S&P 500 returns are on a total return basis. I.e. they include the effects of dividends being reinvested.
** Price only
Check the background of this investment professional on FINRA’s BrokerCheck.
An Investment Advisor registered through CUSO Financial Services, L.P., Gavin has 22 years of experience as an advisor in the Puget Sound area.
“I believe every client is unique and deserving of a personalized financial plan that will help them reach their individual financial goals. Before I make any recommendations, I like to get to know my clients. By asking the right questions, and developing an honest, trusting relationship I can really get a sense of what’s going to work best for them.”
Gavin graduated from the University of Washington with a BA in Business Administration and started his financial career with US Bank in the Investment Department. Prior to joining Verity in 2006, he spent eight years with Piper Jaffray.
So what is Gavin’s vision for his dream retirement?
“My dream retirement would be absolutely worry free: financially, emotionally, and in every aspect of life. My finances would be in order so expenses for travel, luxuries, and gifts for the kids, grandkids, and great-grandkids would be taken care of. My kids would be financially sound, so I would be confident in their prosperity. This would give me the freedom to travel and play and do whatever it is I want to do.”
When Gavin’s not working, he enjoys spending time with friends and family, watching Husky football, and taking weekend trips around the Northwest.
Gavin is registered to transact securities business in the states of WA, OR, CA, AZ, FL, HI, ID, IL, MN, NM, NY and VA.
*Non-deposit investment products and services are offered through CUSO Financial Services, L.P. (“CFS”), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. Verity Credit Union has contracted with CFS to make non-deposit investment products and services available to credit union members.
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