The markets delivered a Christmas gift that no one asked for this year, a bear market. Stocks capped a turbulent year with a steep sell off in the fourth quarter. 2018 was a tough year for almost all assets categories around the world. The best performing asset was cash beating both stocks and bonds. This is the first-time cash has been the best performing asset since 1994.
The US markets are entering the final quarter of the year in a strong position. The S&P 500 had its best quarterly performance since 2013, hitting fresh all-time highs again this quarter. Other milestones were reached as Apple and Amazon became the first companies in the US to reach a $1 trillion market value.
Markets balanced strong economic growth in the US against global trade tensions this quarter. Despite the escalating trade rhetoric, stocks ended the quarter higher and are once again positive for the year. The S&P 500 is still about 4.5% off from the all-time highs reached in January of this year.
The quiet calm that investors grew accustom to last year ended this quarter as the market has entered a period of increased volatility. The year started off as 2017 ended with stocks enjoying their glide higher. The S&P 500 jumped 7.4% by January 26th only to give back all the those gains as investors became spooked by rising interest rates.
2017 was a remarkable year for investors. The final quarter of the year looked very similar to the prior three. It saw stocks steadily move higher with minimal volatility. The S&P 500 had only two trading days this year where stocks gained or declined more than 1.5%. This is the lowest volatility seen looking back at over 30 years of market history.
Stocks continue to grind their way higher as stocks had their best first half since 2013. The catalyst for stocks continues to be solid corporate earnings and investors’ expectations for improving economic growth. There was some profit taking in some of the better performing sectors like technology late in quarter, but new record highs were consistently hit during the quarter.
The momentum from the post election rally continued into the new year. Stocks were strong this quarter having their best start to the year since 2013. The themes this quarter were volatility remained historically low, confidence is still robust and governing can be a grind.