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2018 Year End Market Thoughts


2018 is officially in the books, as far as the market is concerned.  Let’s review some details from the year end data.

  • The S&P500 and DOW both were negative for the year.  Their respective returns were -6.2% and -5.6%.
  • Small Cap Value was the worst performing domestic stock class with a loss of 12.9% for the year.  Large Cap Growth was the best of the worst being down only 1.5%.
  • Even with the worst year in a decade a Large Cap Blend model is up 355% since the market lows in March 2009.
  • The current P/E (Price to Earnings) ratios for most domestic stock asset classes are below their 20-year averages.  They range from Small Cap Value at 78.8% to Small Cap Growth at 99.9%.  However, most are 10% below their 20-year averages.
  • We continue to try and break the record for the longest period of economic expansion as we are in second place at 114 months right now. 
  • One unique factor with this economic expansion is it has been with the lowest GDP growth versus other expansions.  It is definitely the “little engine that could” expansion.
  • Household Net Worth declined slightly at the end of the year and the Household Debt Service ratio has changed from decreasing to a flatter rate.
  • Wages continue to increase as unemployment continues to drop. 
  • 8.8 million jobs were lost during the Great Recession.  Since then over 20 million jobs have been added.
  • The 5-Year Treasury bond was the best performing of the bond classes in 2018 with growth of 1.42%. Munis were right behind at 1.41%.
  • Overall, Cash was the best performing of the primary asset classes at 1.8% growth. Emerging Market equities was the worst at -14.2%.
  • In the 24 months before a market peak, the S&P500’s average return is 41%.  The average for the 24-month period after a market peak is -1%.
  • Your random note –Most popular sectors for the various quadrants of the US are Financials in the Northeast, Energy in the South, Industrials in the Midwest, and Technology in the West.  Least popular are Energy in the Northeast, Technology in the South, Financials in the Midwest, and Industrials in the West.