January 2019 Financial Markets Summary

Now that we have closed the book to 2018, let’s pause to review the year and potential outlook for 2019.

The fourth quarter, and especially December, came under real pressure as the Federal Reserve continued increasing interest rates, trade frictions with China escalated and investors focused on global growth concerns.  Domestic stocks dropped by -14% to -21%, while international fell by -7% to -13%.  The week before Christmas was the worst for domestic stocks since the financial crisis, followed by the best day since the crisis on December 26th.

Domestic stocks ended the year with losses of -6% to -12%.  The energy and basic materials sectors were both down by over -20% with the recent plummet in oil prices.  The lone sectors eking out positive returns were utilities and healthcare.  2018 was a unique year where nothing seemed to perform all that well.  Dating back to 1972, at least one major asset class, whether that be large, mid or small domestic stocks, developed market international, emerging markets, U.S. Treasuries, bonds, commodities or real estate experienced at least a 5% return.  However, 2018 marks the first time in 46 years where none of these asset classes were able to generate the 5% return.  In fact, bonds were the only major asset class with positive returns.

Politics also seemed to dominate the news and impact markets in 2018.  The year started with a bang largely due to the individual tax reform and corporate tax cuts.  This pushed domestic stocks higher to one of the strongest Januarys on record.  However, this seemed to be short lived as the tariff concerns between the U.S. and other nations evolved.  Congress’s power then shifted to a divided government with the mid-term elections and finally closed the year with a government shutdown.

Many of these helped elevate volatility in markets worldwide.  Who knows what is in store for 2019, but we do not see this changing anytime soon.  We are likely to continue experiencing wide swings in markets from day to day and week to week.   We remind clients to keep their next 5-8 years of income needs from the portfolio in stable assets such as cash, CDs and short-term bonds.  Please keep in mind our time-tested belief that “today’s headlines and tomorrow’s reality are seldom the same.”

Asset Index Category Category Category 5-Year 10-Year
3 Months 2018 YTD Average Average
S&P 500 Index – Large Companies -14.0% -6.2% 6.3% 10.7%
S&P 400 Index – Mid-Size Companies -17.6% -12.5% 4.4% 11.9%
Russell 2000 Index – Small Companies -20.5% -12.2% 3.0% 10.5%
MSCI ACWI – Global (U.S. & Intl. Stocks) -13.1% -11.2% 6.1% 9.7%
MSCI EAFE Index – Developed Intl. -12.5% -13.8% 4.1% 6.3%
MSCI EM Index – Emerging Markets -7.5% -14.5% 1.7% 8.0%
Short-Term Corporate Bonds 0.5% 1.0% 1.3% 2.7%
Multi-Sector Bonds 1.6% 0.0% 2.5% 3.5%
International Government Bonds 2.1% -0.8% 0.5% 1.4%
Bloomberg Commodity Index -9.4% -11.2% -8.8% -3.8%
Dow Jones U.S. Real Estate -6.0% -4.0% 8.1% 12.1%


Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment, strategy, or product or any non-investment related content, made reference to directly or indirectly in this newsletter, will be suitable for your individual situation, or prove successful. This material is distributed by PDS Planning, Inc. and is for information purposes only.  Although information has been obtained from and is based upon sources PDS Planning believes to be reliable, we do not guarantee its accuracy.  It is provided with the understanding that no fiduciary relationship exists because of this report.  Opinions expressed in this report are not necessarily the opinions of PDS Planning and are subject to change without notice.  PDS Planning assumes no liability for the interpretation or use of this report. Consultation with a qualified investment advisor is recommended prior to executing any investment strategy. No portion of this publication should be construed as legal or accounting advice.  If you are a client of PDS Planning, please remember to contact PDS Planning, Inc., in writing, if there are any changes in your personal/financial situation or investment objectives.  All rights reserved.