Whether you reached your personal goals in 2018, faced challenges, or are looking for a 2019 reboot, let’s take a moment to hit on the key themes from the past year.
Before I get started, I want to revisit a comment I included in my commentary from the beginning of 2018.
The momentum generated by a growing U.S. and global economy is likely to carry over into the new year. While a 2018 recession can’t definitively be ruled out, leading indicators suggest the odds are low.
That said, unexpected events can create short-term emotional responses in the market that are best avoided by long-term investors.
Last year’s lack of volatility was simply remarkable. According to data from LPL Research and the St. Louis Federal Reserve, the biggest drop in the S&P 500 amounted to just 2.8%. It was the smallest decline since 1995.
The average intra-year pullback for the S&P 500: 13.6% (LPL Research).
The U.S. economy exhibited strong growth in the second and third quarter, a recession did not ensue, and yes, 2017’s lack of volatility was remarkable. We knew it wouldn’t last, but predicting an expected exit date is difficult.
January began 2018 on a firm footing, building on highs in the wake of tax reform, low interest rates, low inflation, and strong corporate profit growth. If stocks rise or fall on the fundamentals (and they usually do), the outlook was quite favorable as the year began. (more…)