How bad was 2018 actually …?
Markets have proven to be choppy both locally and globally, with anaemic returns in the past few years. 2018 was testament to this, as a record setting year, but not for the reason investors would like to remember. It turned out to be the worst performance for stocks in the past 10 years. To put this into perspective, globally, the S&P 500 was down 6.2% in dollars (only the second time it fell, in the past decade) and locally, the JSE was down 9%. As seen in the graph alongside, 90% of assets globally ended with negative dollar returns, not a single major equity market had positive returns.
December was a particularly bad month, with the S&P 500 dropping by 9%, the worst December since 1931. When analysing the fluctuations experienced by the markets, it was found that the S&P 500 moved up/down by more than 1%, 9 times in December alone. It moved this much, 64 times in 2018, compared to 8 times in 2017, this simply shows how volatile 2018 turned out to be. A more recent example was the tweet made by President Trump regarding the ongoing trade negations with China, which caused the S&P 500 to drop 1.2% over night.
SA was on the verge of making history, nearly resulting in a zero return over a rolling 5 year period which has not happened in the past 48 years. Fortunately, the Fed’s more dovish rate stance became one of the key aspects in turning last year’s losses into this quarters gains. Quarter 1, 2019 has managed to gain 13.6% in dollars on the S&P 500 and 8% on the JSE. This demonstrates that market returns come in large swings when investing in equities and time in the market is the most important.
No one has a crystal ball and we aren’t sure what the next hurdle may be, however we know that in a full market cycle, these kinds of fluctuations are expected and will occur again and again in the future. The experienced fund managers which we use, are actively positioning their funds to take advantage of the discounted asset prices which the market has presented them with.
However, there are several factors to be aware of, that can influence volatility and growth going forward in local and global stocks, namely; signs of global economic slowdown, ongoing trade war negotiations, political dysfunction, fears of inflation and ever-changing regulations, to name a few. If you are anxious or uncertain about your portfolio, talk to us.